MSPE Asia sees returns with China Shanshui

The divestment comes two years after MSPE Asia reduced its stake via three block trades, MSPE Asia has now sold 246.7 million shares of China Shanshui Cement, representing 8.8% of the company's total shares. Since reporting its 2010 results on March 25, China Shanshui's stock price has rallied, seeing a 7% hike in share price and 31% rise year-to-date. The offloaded shares were priced at a 3.4% discount to the last sale, and within 6% of the all time high of HK$7.44 ($.96). Morgan Stanley was the sole book runner.

"We have worked very closely with Shanshui management to drive value-add to this business," Homer Sun, Managing Director and Head of China at MSPE Asia told AVCJ. According to Sun, in 2006, MSPE Asia helped improve internal controls in order to bring in KPMG to replace PricewaterhouseCoopers when it resigned as auditor. In 2007, the PE outfit saw a window for consolidation and helped to negotiate and structure the financing for five domestic acquisitions in Shandong and Liaoning province. In 2008, MSPE Asia helped the company complete its IPO.

"Three-quarters of the capital we invested was part of the financing for RMB4 billion ($680 million) of acquisitions that we helped to drive in 2007 and that increased Shanshui's capacity by 75%," Sun noted. Such moves have made Shanshui the number three cement company in China and the number one player in Shandong and Liaoning provinces.

After China Shanshui Cement's July 2008 IPO, MSPE Asia owned 26% of the company. MSPE Asia's stake was reduced via three market-block sales executed in April, July and September 2009, leaving MSPE Asia's holdings down to 1/3 of its original position.

"MSPE has had an outstanding strategic partnership with Shanshui Cement that has included working together on transformative roll-up M&A in 2007 and a successful IPO in 2008," Sun, added. "We will, at Shanshui's request, continue to serve on the board going forward."

Sun notes that MSPE Asia continues to focus on backing leaders in industries on the verge of consolidation. Most recently, industry focus has included pharmaceuticals, where they have made two investments in the past 18 months.

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• Topics
• Exits
• Greater China
• Morgan Stanley Private Equity Asia