Carlyle, Yunfeng to exit GDC to Huayi Brothers
The Carlyle Group and Yunfeng Capital are set to exit from GDC Technology as Huayi Brothers Media plans to acquire a controlling stake in the digital cinema equipment manufacturer.
Huayi Brothers, the Chinese movie studio, currently owns 12% of the Hong Kong-headquartered business. Carlyle has 46.33% while Yungfeng holds 17.34%. Huayi plans to increase its holdings to 79% by means of share purchase in two stages, according to a regulatory filing.
Firstly, Huayi will pay a total of $67.6 million to acquire 141 million shares, held by the two private equity firms and one individual shareholder, at $0.48 apiece. Carlyle is selling 97 million shares while Yunfeng will offload 36 million shares. Individual investor vehicle Mighty Capital will sell 8 million shares.
Upon completion of the deal, Carlyle and Yunfeng will receive $47 million and $17 million, respectively.
The second stage of the proces will see a further 35 million shares sold at a price linked to GDC's financial performance. If the company achieves net profit of at least $17 million each year until 2016 - valuing the business at $125 million, based on a 7.35x multiple - Huayi will acquire 24 million shares from Carlyle and 9 million from Yunfeng at $0.48 apiece. If these targets are not met the price will be lower.
GDC's parent, Hong Kong-listed Global Digital Creation Holdings, agreed to sell an 80% interest in the company to Carlyle Asia Growth Partners IV in August 2011 for HK$568 million ($73 million). Yunfeng is understood to have participated in this deal. Huayi Brothers bought a 9% stake in GDC for $20.9 million in 2012.
Last year, the company tried to raise up to $75 million through a US IPO but the offering struggled in the face of weak investor sentiment.
GDC claims to have the largest installed base of digital cinema services in Asia Pacific and the second-largest globally, as of March 2013. Clients include all of the top 10 cinema chains in China, with digital servers installed for nearly 8,000 screens nationwide. It also has 8,300 serves in the US and ships projection systems to India and Mexico.
The company's revenue in the first half of this year was $36.35 million with net income of $5.91 million.
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