CITIC, CDH generate 4x return through China auto parts exit

Aotecar, which has been sold to Tianyou Investment for an undisclosed sum, was one of the first state-owned enterprise (SOE) buyouts in China by offshore private equity funds.

CITIC had already completed its landmark investment in Harbin Pharmaceutical but had yet to raise its first fund when negotiations over Aotecar began in 2005. CDH was brought in as a minority co-investor so there was sufficient capital for the deal.

The company itself had already been around for about 10 years. It was founded by Yonggui Chen, an entrepreneur with a technical background who was keen to enter the compressor space, supplying components used in car air conditioning systems. He received start-up capital from Nanjing Lukou Airport and Hong Kong-based Fang Brothers Investments - subsequently took a minority stake.

When the airport decided it wanted to divest the asset, CITIC moved in, having already built up a relationship with the management team. It ended up with 51% of the company while CDH had 39%.

During the investment period, debt and equity capital was put into the business to support expansion. In 2010, Aotecar was China's leading manufacturer of air-conditioning compressors with a 16.5% market share, turnover of RMB1.2 billion ($194.7 million) and RMB148.7 million in net profit. Last year the company cleared 3 million units, equipping more than one quarter of the 11 million vehicles sold in China. It supplies all the major domestic auto makers as well as several foreign-invested joint venture manufacturers.

There were two attempts to list Aotecar in Hong Kong - under the name China Auto System Technologies - in late 2010 and 2011, but the offerings failed to get off the ground due to market volatility. Tianyou prevailed over a number of prospective domestic and foreign strategic buyers. It is owned by a high net worth individual with an interest in auto parts and the expectation is Aotecar will eventually go public.

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• Topics
• Exits
• Industrials
• Greater China
• Buyouts
• buyout
• CITIC Capital
• CDH Investments Management
• Exit
• Trade sale
• automobiles
• manufacturing
• China