KKR to acquire China business of Hong Kong-listed NVC

The deal will see KKR and NVC form a joint venture that will hold a 100% stake in NVC China; KKR will own a 70% stake in the JV and will pay a cash consideration of $794 million to NVC from its third Asia fund.

The company’s non-lighting business in China is not included in the transaction and will stay under NVC’s control, along with its international business and China original design manufacturing (ODM) business.

A special dividend of not less than HK$0.90 per share will be paid to NVC shareholders as part of the deal. The transaction is expected to close in the fourth quarter of 2019.

“China’s lighting market has experienced tremendous momentum over the past 20 years and continues to develop as technology advances and next generation products come online,” said Paul Yang, head of KKR’s Greater China team, in a statement. “We look forward to working together with NVC China’s talented management team to support their long-term growth plan, as well as contributing to the overall development of China’s lighting industry and deepening KKR’s commitment to the market.”

KR’s investment comes as NVC struggles with a legacy of legal issues left behind by founder and ex-CEO Changjiang Wu. Wu triggered a crisis at the company in 2014 when he refused to comply with a board resolution that he step down amid accusations that he had improperly obtained bank loans in the company’s name. A subsequent investigation uncovered loans worth RMB629 million ($102.8 million) entered into by Wu without the knowledge of the board between 2013 and 2014.

NVC has been mired in a series of court battles stemming from Wu’s arrest in Huizhou in 2014 and subsequent conviction in 2016, when he was sentenced to 14 years in prison for embezzlement. After the NVC subsidiary involved in guaranteeing the unreported loans was held partially liable for repaying the lenders last year, the company sued Wu and several of his family members in an attempt to recover RMB265 million ($37.5 million). However, due to the large number of competing claims against the defendants, the amount was deemed unrecoverable and written off.

The judgment and write-off contributed to a net loss of RMB302 million for the year ended December 2018, after a net profit of RMB332 million the year before. Over the same period, revenue grew from RMB4.1 billion to RMB4.9 billion.

NVC’s previous private equity backers including SAIF Partners and Goldman Sachs, the former of which has its own troubled history with the company. Neither investor was listed as a shareholder in NVC’s most recent annual report.

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

• Topics
• Greater China
• Industrials
• Buyouts
• China
• KKR
• manufacturing