Bain sells offs Chinese chemical companies

The original sum invested was $41 million for a 23% stake in the offshore company that owned Feixiang. When Rhodia, another French chemicals producer, came in for the Chinese firm in June 2010, paying $489 million, Bain and some minority shareholders retained two subsidiaries, Hipro and Casda. These were businesses that the private equity player helped develop after making its initial investment in Feixiang.

"When we made the investment in Feixiang in 2007 there was only the business that was sold to Rhodia," says Jonathan Zhu, managing director of Bain Capital Asia. "With part of the proceeds from our investment in Feixiang we started Hipro. Then we went ahead and invested in Casda."

Taking into account the two transactions, Zhu estimates that Bain's net return is more than 4x.

Hipro produces bio-sourced polyamide 10.10, a plastic derived from castor oil and is predominantly used to manufacture fuel pipes for automobiles, as well as in electronics and renewable energy. The company is also looking to supply pipelines to the oil industry as its plastics are more flexible and less susceptible to corrosion than metal. Casda is the world's leading producer of sebacic acid, which is used to produce polyamide 10.10.

For Arkema, already the global market leader in polyamide-based plastics, the acquisition represents an opportunity to expand its footprint in China.

Zhu explains that Feixiang met both of Bain's basic pre-investment requirements: It was a leader in its own industry and the existing management was looking for a partner rather than just a passive source of capital. The private equity firm brought in 15 people at middle management level as well as a new CFO, head of HR and R&D leader.

The exit route, however, came as a surprise. "Our initial assumption was that our exit would come through the public market," says Zhu. "When Rhodia came knocking we talked to the controlling shareholder and he was very open to selling the business."

Given the weak capital markets, a trade sale for Hipro and Casda was the best option.

Bain has returned a portion of money to investors from several other deals made under Bain Capital Asia Fund I, through dividend payments and IPOs that haven't been fully sold down. That vehicle, which closed at $1 billion in February 2007, is now almost fully deployed. The target for the second fund is reportedly $2 billion.

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• Topics
• Exits
• Greater China
• China
• Bain Capital Asia
• Exit
• Trade sale