Abax, chairman complete $364m Fushi Copperweld take-private
Abax Global Capital has finally completed its management buyout of NASDAQ-listed Chinese wire manufacturer Fushi Copperweld more than two years after the initial bid was submitted. The transaction, staged in conjunction with Li Fu, Fushi’s chairman and CEO, and financed by China Development Bank, values the company at $364.8 million.
Shareholders approved the $9.50 per share cash offer on December 11 and Fushi ceased trading on December 27, having become a wholly-owned subsidiary of Green Dynasty, the acquisition vehicle. Fu, Abax and their affiliates owned 29.4% of Fushi's outstanding shares when they won board approval on June 28, and required support from at least 60% of the remaining shareholders for the deal to go through. The vote came down 65% in their favor.
The buyout process has been protracted, taking more than twice as long as the Abax-backed management buyout of Harbin Electric last year. Li and Abax initially bid $11.50 per share and then revised their offer downwards to $9.25 in November 2011 before an agreement was reached at $9.50. TPG Capital joined the buyer consortium in December 2011, but dropped out before the revised offer was submitted in June.
Under the terms of the transaction, shareholders - not including those who rolled their interests into the acquisition vehicle - will receive an aggregate of around $260 million. Of this, $185 million comes in the form of a loan from China Development Bank's Hong Kong branch and the remainder is equity financing, with Abax and Fu contributing $30 million and $45 million, respectively.
Weak public market valuations among US-listed Chinese companies - driven by a combination of the global macro environment and a collapse in investor sentiment after financial inconsistencies were uncovered in filings made by several firms - have led chairmen to consider privatizations, ultimately with a view to re-listing in Asia.
Fushi is one of a number of firms to come under pressure from short sellers. Muddy Waters claimed in April that the company was a high fraud risk, alleging falsified financial statements and sales figures and suspect related-party transactions. Fushi denied the allegations.
The successful completion of the management buyout means that Fushi joins Chemspec International (Primavera), China Fire & Security (Bain Capital), Funtalk China (PAG) and Harbin Electric (Abax) as private equity-backed take-private deals that have actually closed.
AVCJ and Roth Capital data show that 12 more transactions are in progress - four have received board approval, most recently ShangPharma (TPG) and Focus Media (The Carlyle Group, FountainVest Partners, CITIC Capital Partners, China Everbright and Fosun International) - while one more, CNinsure (TPG) was terminated.
In total, nearly 50 US-listed Chinese companies have engaged in take-private activities, with or without private equity support.
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