MSPEA-backed privatization of Yongye wins board approval
A $339 million management buyout offer for Yongye International, supported by Morgan Stanley Private Equity Asia (MSPEA), has won board approval. The US-listed Chinese animal and plant feed maker is now set to be taken private, pending a shareholder vote.
Abax Global Capital, part of the consortium when the original bid was submitted last October, is no longer involved in the deal. It has been replaced by another entity, Lead Rich International.
Yongye's chairman and CEO, Zishen Wu, MSPEA and related entities will buy all outstanding American Depository Shares for $6.69 apiece in cash, according to a regulatory filing. This represents a 39.7% premium to the company's closing price before the proposal was received. The prospective buyers initially offered $6.60 per share.
The acquisition will be financed through a combination of debt and equity. Wu and Lead Rich will provide cash equity financing of $12 million and $15 million, respectively, while senior debt financing of up to $214 million has been committed by China Development Bank's Inner Mongolia branch. Lead Rich will provide an additional $35 million in mezzanine debt financing.
MSPEA and Wu will roll over their existing equity stakes into the acquisition vehicle. The private equity firm invested $50 million in Yongye in June 2011 and then bought a further $11 million worth of shares on the open market. As of year-end 2011, MSPEA is understood to have held a 12% stake in the company through common shares and preferred shares on a converted basis.
Beijing-based Yongye claims to be the leading crop nutrient company in China based on total sales in 2012, with production facilities located in Inner Mongolia. Its principal product is a liquid crop nutrient but the company also produces a powder animal nutrient for dairy cows. Both are sold under the "Shengmingsu" brand.
Yongye posted a net income of $99 million for 2012 against sales of $390.4 million. This compared income and sales of $89.8 million and $214.1 million the previous year.
A total of 10 private equity-backed take-private deals for US-listed Chinese companies have been completed in the last two years, five of them in the last six months alone. They include the MSPEA-backed management buyout of dairy firm Feihe International.
A further 12 deals are still in process, of which seven have board approval.
In 2009, MSPEA partnered with the management of Singapore-listed Sihuan Pharmaceutical to take the company private. It re-listed in Hong Kong the following year. MSPEA made a partial exit from Sihuan earlier this month.
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