CITIC Capital, FountainVest buy control of pallet leasing business

Sinotrans, a Hong Kong-listed subsidiary of China Merchants Group (CMG), said in October it would divest a 55% interest in Loscam as part of efforts to focus on its core logistics services offering. CITIC Capital has paid RMB1.49 million for 33% with FountainVest contributing RMB990 million for 22%. Sinotrans has held on to the remaining 45%.

Loscam was established in 1942 in Australia and operates in 12 countries in Asia Pacific. It provides pallets and other containers as well as leasing and pooling services that minimize the handling of products – and therefore increase efficiency – as they move through the supply chain. The company was acquired by Affinity Equity Partners in 2005 and sold to CMG for around $575 million five years later.

CMG merged with Sinotrans & CSC and completed a reorganization of the various shipping, ports and logistics assets in 2017. Sinotrans acquired China Merchants Logistics, creating a business that spans freight forwarding, logistics, storage and terminal services, and trucking, shipping and express services. External revenue reached RMB72.6 billion last year, of which logistics equipment leasing accounted for 2%.

In 2017, pallet leasing volume increased 13.5% year-on-year to 22.9 million 20-foot equivalent units (TEUs), while container leasing rose 22.4% to 82,000 TEUs. This includes services provided to other divisions within Sinotrans. External business generated RMB1.46 billion in revenue and RMB360 million in profit, according to Sinotrans' annual report.

The October filing regarding the sale of Loscam indicates that the business delivered RMB201.6 million in profit for 2017, up from RMB191.3 million a year earlier.

"China is one of the fast-growing markets, and leasing propensity and pooling model are still relatively new compared with other developed markets. We see huge growth potential in China with the adoption of the pooling model to improve supply chain efficiency and standardization," Yichen Zhang, CEO of CITIC Capital said in a statement.

This is the private equity firm's sixth corporate carve-out in the last two years. Others include the McDonald's business in mainland China and Hong Kong, Pearson-controlled Wall Street English, Ansell's sexual health unit, a database division of Euromoney Institutional Investor, and Ajinomoto's Amoy Food. CITIC recorded a first close of $1.3 billion on its latest US dollar-denominated fund in September. The overall target is $2 billion.

FountainVest is currently deploying its third US dollar fund, which closed at the hard cap of $2.1 billion in 2016. Recent activity includes a proposed EUR4.6 billion ($5.23 billion) privatization of Finland-listed Amer Sports. Earlier this week, the firm announced it had raised RMB1.7 billion for its first renminbi vehicle.

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• Topics
• Greater China
• Industrials
• Support services
• Buyouts
• China
• CITIC Capital
• Fountainvest Partners
• Asia
• Logistics
• Transportation