China's Jinpan agrees Forebright-backed privatization
Jinpan International, a US-listed Chinese electric transformer manufacturer, has agreed a take-private deal with the company’s chairman and Forebright Capital. It values the business at approximately $98 million.
The board has accepted an offer of $6.00 per share, a 65% premium to the closing price on September 14, the last trading day before the bid was made public. The initial bid was $4.50 per share, although an aborted offer submitted by Zhiyuan Li, chairman and CEO of Jinpan, in September 2014 was worth $8.80 per share. Jinpan's stock climbed more than 24% on January 25 to close at $5.24.
The consortium plans to finance the deal through a combination of debt and equity capital. As of April 2015, Li held a 24.3% stake in the company, and this will be rolled over into the acquisition vehicle. Forebright and Li have also agreed to contribute $75.5 million in cash, with Forebright set to provide a parallel $25 million debt facility to Li.
Forebright is described in the regulatory filing as being run by a group of experienced investment professionals who have completed several take-private deals involving US-listed Chinese companies. The combined market value of these privatized companies exceeds $450 million.
The Forebright team spun out from China Everbright International I 2014. It is participating in the Jinpan transaction through Forebright Smart Connection Technology, a subsidiary of Forebright New Opportunities Fund. A filing for the vehicle was made in August 2014 with a target of $600 million. A subsequent filing in July 2015 indicated that $236.8 million had been committed by 19 LPs. This does not necessarily represent all the capital raised.
Jinpan designs and manufactures medium voltage power distribution products, including cast resin dry type transformers, reactors, switchgears, and substations. It supplies a wide range of clients in the industrial and infrastructure sectors, with a particularly strong line in green energy and smart grid supply chains.
The company reported net sales of RMB1.47 billion ($230.8 million) in 2014, up from RMB1.39 billion the previous year. Net income fell from RMB102.6 million to RMB94.8 million over the same period.
The take-private still requires shareholder approval.
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