Morgan Stanley PE Asia backs China XD Plastics take-private

The consortium is offering to buy all outstanding American Depository Shares (ADS) for $5.21 apiece, according to a filing. This represents a 28.6% premium to the February 15 closing price. The stock closed up nearly 5% at $4.25 on February 17, a two-month high.

MSPEA would participate through its third pan-regional fund – the firm is currently investing its fourth vehicle – because it invested $100 million in XD Plastics in 2011. The transaction was structured as a subscription to redeemable convertible preference shares that would convert into common stock at an initial price of $6.25 per share.

XD Plastics said in its 2015 annual report that MSPEA owns 100% of its outstanding Series D preferred stock, representing approximately 24.5% of its issued and outstanding shares on an as converted basis. The consortium owns approximately 74% of the company, with Jie Han – the chairman and CEO who co-founded the business in 2004 – controlling the bulk of that position.

XD Plastics manufactures polymer composites materials, primarily for the automotive industry. Its products are used in components – ranging from bumpers and mirrors to dashboards and air conditioner casing – in 28 brands made in China, including Audi, Mercedes Benz, BMW, Buick, Chevrolet, Mazda, Toyota, and the Volkswagen Passat, Golf and Jetta.

The company has manufacturing bases in Heilongjiang and Sichuan provinces, and has started production in the United Arab Emirates. As of December 2015, it had approximately 390,000 metric tons of domestic production capacity across 84 production lines, having used MSPEA’s initial investment to put expansion plans into action. Prior to December 2012, capacity was 255,000 metric tons across 58 production lines.

Revenue came to $999.2 million in 2015, down from $1.11 billion the previous year. Net profit dropped to $83.7 million from $120.7 million over the same period.

XD Plastics represented MSPEA’s second China PIPE deal in the space of three months in 2011. It also invested $50 million in US-listed Yongye International – and backed a privatization that was completed in mid-2014. Other take-privates of US-listed Chinese companies involving the GP include Feihe International, Noah Education Holdings and Sino Gas International Holdings. The latter was exited in 2015.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Industrials
• Buyouts
• China
• manufacturing
• Morgan Stanley Private Equity Asia