Partners Group's Sino-European play

The three guide rail manufacturers are China-based Changjiang Runfa, Italy's Monteferro and Suzhou Savera Elevator Riding System, a 47-year-old company with Spanish origins that put roots in China in 1999. Partners Group liked what it saw and duly emerged triumphant from a competitive process with an agreement to buy a 75% stake in the business for an enterprise valuation of more than $450 million.

"It was a Spanish company that chose to go global and then over the past 15 years the construction boom in China has turned the country into the world's largest market for elevators. The second-largest market is India and it is only 10% the size of China," says Kelvin Yu, managing director and head of China at Partners Group. "It is a European firm with European levels of corporate governance but the business is very dependent on China."

Savera moved its headquarters to Shanghai in 2012 and relies on China for approximately 85% of its revenues, believed to have surpassed $500 million last year. The company primarily operates through a network of local joint ventures, as well as maintaining a presence in Germany, India and Spain.

Savera came on the market because the founding family and majority owner was looking to sell to a group that could drive the future business growth in Asia. The family retains a minority interest in the business alongside its long-term Chinese partner. So this was a succession-planning opportunity, but one with two twists.

First, the founders wanted to take Savera public in China but abandoned the idea because the market was too challenging. Nevertheless, the company had still been restructured onshore to facilitate the listing, which made it more difficult for investors seeking to finance an acquisition.

According to industry sources, one of the reasons Partners Group prevailed was its willingness to do a pure equity deal up front with a view to refinancing later. This is likely to involve an offshore restructuring, which could put the company on course for a Hong Kong listing.

Second, Savera's fortunes are tied to those of China's real estate market, so the buyer had to be comfortable with a sector that has been struggling of late. "We took a long-term view," explains Yu. "There will be ups and downs but we believe China is seeing long-term secular growth in this sector - millions of people are going to move to cities in the coming years as part of the ongoing trend of urbanization."

Partners Group's value creation plans for the company include expanding geographical coverage and pursuing add-on acquisitions.

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• Topics
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