CDH-owned Nanfu Battery completes China reverse merger
CDH Investments-controlled Fujian Nanping Nanfu Battery, China’s leading manufacturer of alkaline batteries, has listed on the National Equities Exchange and Quotations (NEEQ) through a reverse merger.
The proposed background listing plan was first announced in June. The listing will facilitate a liquidity event for the shareholders in Nanfu, who can sell shares on NEEQ - also known as the New Third Board - to qualified investors through direct negotiation with investors, or via market makers.
According to a filing, Yunnan Akin Technology, a shell company listed on the New Third Board, has issued RMB2.64 billion ($400 million) worth of new shares in exchange for a 60% stake held by Dafeng Electronics, an investment entity owned by CDH. Following the transaction, the listed entity is now controlled by Shangzhi Wu, CDH's chairman, and Shuge Jiao, its CEO.
CDH bought Procter & Gamble's (P&G) entire 78.8% in Nanfu for close to $600 million in October 2014. It was one of the largest PE corporate carve-outs ever seen in the country, and also CDH reclaim control of an asset it previously owned.
According to AVCJ Research, China International Capital Corporation (CICC) invested $60 million in Nanfu in 1999 to help the company improve its product line and fight off competition from the likes of Duracell. CDH - which spun out from CICC in 2002 - committed an undisclosed sum to Nanfu in 2002. The investors exited when Gillette, also owner of Duracell, bought a majority stake in Nanfu in 2003. Two years later, P&G purchased Gillette.
Nanfu now produces more than 1.2 billion batteries per year and generates annual revenues well in excess of $300 million. Ninety percent of its business is domestic, channeled through an estimated two million points of sale running all the way from tier-one to tier-four cities.
The company is estimated to account for over 70% of sales of legitimate alkaline batteries in China. It outsells local peers such as Twin Deer, GP Battery and White Elephant, while foreign players like Duracell still focus on the premium segment and have a correspondingly small share.
In the latest filing, Nanfu is expected to generate RMB2.19 billion in revenue in 2016, up from RMB2.1 billion last year. Net profit is projected to reach RMB460 million, compared to RMB430 million in 2015.
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