Deal focus: CITIC exits a bigger Tri-Wall

CITIC Capital Partners always knew there would be strategic interest in Tri-Wall. When it bought the heavy duty packaging business in 2010, several local corporates submitted higher bids, but the founder went with CITIC because he wanted a partner with expertise in China. Six years later, with revenues up twofold at $200 million, a stronger presence in China, and a foothold in Europe, inbound inquiries started to come.

Rengo - a Japanese packaging producer keen to expand overseas - has agreed to buy the entire business for $221.7 million. CITIC stands to make a sizeable return on the $65.5 million it paid for a 67.1% interest as a joint investment from its Japan and international funds.

"One of the reasons Rengo is buying Tri-Wall at this price is the global footprint and ability to serve customers not only in Asia but in Europe as well," says Hanxi Zhao, a managing director with CITIC's international PE team. "A lot of the customers are global and Tri-Wall's platform allows more synergies with these customers."

The Tri-Wall brand originated in the US but the licensing rights were sold separately in different regions. Yuji Suzuki set up the Asia entity in Japan in 1974 and then expanded into China and Southeast Asia, backed by a number of VC investors. A planned IPO in Japan failed to get traction due to the global financial crisis, so Suzuki started looking for partners to drive growth, with competency in China a key consideration. His objective switched to an IPO in Hong Kong and Tri-Wall's headquarters moved to the territory.

CITIC's contribution within China came in two parts. On the production side, it helped Tri-Wall relocate to a new factory, dealing with some legacy labor issues at the older facility; and on the retail side, it introduced the company to customers such as CITIC Logistics and SF Express. The purchase of a conventional cardboard packaging firm supported business development efforts because it meant that Tri-Wall could meet a broader range of packaging needs.

China now accounts for 50% of revene, up from 45% when CITIC invested. The rest was split 25-35 between Japan and Southeast Asia, but now Europe is responsible for 15%, the same as Japan, with Southeast Asia on 20%. European expansion was achieved through the purchase of the Tri-Wall business in Europe from British packaging firm D.S. Smith in 2013. Steps are already being taken to target India, the US and the Middle East.

In assuming control of the business, CITIC also enabled Suzuki, who was over 70 years old at the time of the investment, to step back from day-to-day operations with China head Chuihuan Zhou taking over as CEO.

Masahiro Ito, executive director in the Japan PE team at CITIC, sees this combination of succession solutions and cross-border expansion as typical of the GP's value proposition. "Small and mid-size companies have good technologies and brands, but not the knowledge or resources to expand overseas," he says. "We can provide this."

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• Topics
• North Asia
• Greater China
• Industrials
• Trade sale
• CITIC Capital
• Japan
• Exit
• manufacturing