Chinese private equity firm Primavera Capital has agreed to buy $51m of convertible bonds in China XLX Fertiliser, becoming the company’s third largest shareholder and its largest institutional investor.
China XLX Fertiliser is one of the largest coal-based urea producers in China. It is mainly engaged in the production and sale of urea, compound fertiliser and methanol. Its current production capacity of urea, compound fertiliser and methanol are 1.25 million tons, 600,000 tons and 200,000 tons respectively.
Primavera will subsequently hold a 14.97 per cent stake in the company through the purchase of five-year Renminbi-denominated convertible bonds.
The financing will enable the company to develop its fourth urea plant in Xinxiang City, Henan Province, which is expected to be fully completed in 2013. Its annual production capacity will subsequently increase to more than two million tons.
Lian Jie, a partner at Primavera Capital and the former managing director of Investment Banking Division at Goldman Sachs Asia, will be appointed as a non-executive director of the board at the company.
He said, “China XLX Fertiliser is one of the largest and most cost-efficient urea producers in China. It has an outstanding management team and is taking various measures to boost production capacity and extend its value chain into upstream and downstream.
“We believe our strategic investment in the company will not only provide funds for its future growth, but also lay a solid foundation for its long-term growth through enhanced operating efficiency. Primavera Capital will leverage its resources in the industry and extensive experience in domestic and overseas capital markets as well as mergers and acquisitions to help the company reinforce its capital structure and identify acquisition targets,” he added.
Primavera was founded Dr Fred Hu, the former chairman of Greater China at Goldman Sachs. The firm specialises in mergers and acquisitions, direct investment and growth stock investment.
Copyright © 2011 AltAssets