Sequoia backs Chinese vegetable producer MBO
Sequoia Capital has teamed up with the chairman and CEO of Chinese vegetable producer Le Gaga Holdings to submit a buyout offer that values the NASDAQ-listed company at around $183 million. Le Gaga has seen its net profit increase fourfold over the last four years, but its stock price has fallen 66% since the company went public in October 2010.
According to a regulatory filing, Sequoia and Na Lai Chiu and Shing Yung Ma, Le Gaga's chairman and CEO, respectively, are willing to pay $4.01 per share for all outstanding American Depository Receipts (ADSs). This represents a 16.5% premium to the May 20 closing price.
Details were not given as to how the transaction would be financed, but the consortium said that several institutions have expressed an interest in supporting the deal. The consortium members already own a majority of the company, with Ma, Chiu and Sequoia holding stakes of 30.9%, 4.8% and 15.2% as of March 2012. Alkeon Capital Management and Susquehanna Asia Investment own about 16% between them.
Sequoia led Le Gaga's Series A round in 2006, putting in about $4 million. It also participated in the Series B round two years later, which saw Susquehanna, Walden International and Pre-IPO Partners enter. The total commitment was $24 million. Le Gaga subsequently raised $103 million through its 2010 IPO.
The company started out in 2004 as a broccoli farming business run by Ma. It was incorporated in Hong Kong as Land V and then reincorporated in the British Virgin Islands before becoming Cayman Islands domiciled as Le Gaga Holdings for purposes of the IPO.
Le Gaga claims to be the leading greenhouse vegetable producer in China, selling pepers, tomatoes, cucumbers and eggplants, as well as green leafy vegetables, to wholesalers, institutional customers and supermarkets in China and Hong Kong. As of March 2012, it operated 11 farms in the provinces of Fujian, Guangdong and Hebei, with an aggregate area of 1,671 hectares.
The company recorded a profit of RMB162.8 million ($26.5 million) in 2012, up from RMB38.4 million in 2008. Revenue for the year came to RMB519.4 million.
Sequoia is responsible for one of the 12 other private equity-backed take-private transactions currently underway involving Chinese companies listed in the US. The VC firm is partnering with The Carlyle Group in a management buyout of budget hotel chain 7 Days Group, which won board approval earlier this year. Seven take-private deals of this nature have been successfully closed since August 2011.
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