Bank arm to invest $50m in mainland copper giant
Updated: 2008-03-05 07:17
By Chen Hong(HK Edition)
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The private equity arm of Standard Chartered Bank announced yesterday that it will invest $50 million into a mainland copper-tube manufacturing giant on the chance it will make a domestic initial public offering (IPO).
"This is our first ever pre-IPO investment in a mainland incorporated company, targeting an A-share listing among our existing investments in China," said Chen Fan, head of Greater China operations for Standard Chartered Private Equity Ltd (SCPE).
"It's a strategic investment of SCPE in a leading industry, and we will make more direct investments in Chinese companies as confidence in the market rises," Chen told China Daily by phone yesterday.
While SCPE is a lead investor in the new project, two co-investors, Goldman Sachs and Lehman Brothers, will make a combined $40 million investment in China Golden Dragon Precise Copper Tube Group. The company has been ranked No 1 globally in precise copper-tube manufacturing for years.
Golden Dragon is based in Xinxiang, in Central China's Henan Province. According to a statement issued by the company, it produced about 200,000 tons of copper tubing last year, about two-thirds of its capacity.
The company has maintained over 50 percent of the market share on the mainland.
With eight production bases and 13 production lines located in all of China's key regions, the company has a solid manufacturing system to work from while expanding operations to Mexico, where a new plant is expected to begin mass production by the end of this year.
Stressing SCPE's role as a "long-term investor", Chen said the company is in no rush to go listing.
"The second- and third-ranked players in the copper-tube sector have been successfully listed in the domestic capital market and have earned a widely known reputation," Chen said, expressing his confidence in the new investment.
Given the strong price hike of copper, Chen said his company has a plan to minimize the impact on the copper-tube maker.
"We are not a market speculator," Chen explained. "The company and SCPE co-developed a complete hedging plan and execution process, as well as co-designed an effective risk-control mechanism. Currently, they are well operated and monitored."
Joe Stevens, head of Principal Finance for Standard Chartered Bank, said the deal is a big step in SCPE's business development.
"This deal shows our full commitment to China," he said. More investments in China from Standard Chartered can be expected."
SCPE, which primarily focuses on investing in mid- to late-stage companies in China, South Korea, India and Southeast Asia, will continue to look for investment opportunities in sectors related to consumption services, circulation, manufacturing and media in China, Chen said.
(HK Edition 03/05/2008 page2)