Industrial Financial institution (HK department): taking a management position inside Asian structured finance

Trusted monetary companions are necessary to the profitable completion of any transaction, however particularly when markets are risky and liable to fluctuating with out warning. 

This rapidly turned clear when personal fairness agency Ascendent Capital Companions (ACP) launched into the acquisition of Hollysys Automation Applied sciences, a number one provider of automation and IT options in China – with a well-structured monetary and strategic method that proved essential to the deal being finalised in July 2024.

The transaction set a brand new precedent throughout the Asia Pacific structured finance panorama. Notable was the way it overcome the numerous challenges it posed for all events concerned, as a consequence of substantial financing necessities, an prolonged timeline and the intricate construction involving each home and worldwide events.

On the coronary heart of the answer was essential financing offered by Industrial Financial institution (HK department). Appearing as sole monetary arranger, the financial institution offered a $1.055 billion mortgage representing round 70% of the acquisition price – in flip guaranteeing this financing shaped the spine of the whole monetary bundle.

Securing a extremely fascinating goal

Established in 1993, Beijing-based Hollysys had lengthy been recognised for its dominant market presence and world-class R&D crew in China’s aggressive industrial automation business. But the corporate struggled with dispersed possession and an absence of controlling stakeholders.

This made it an interesting goal for ACP, which has headquarters in each Shanghai and Hong Kong, and has invested throughout superior manufacturing, healthcare and consumption sectors. Additional, the transaction leverages ACP’s experience in privatisations. 

Nevertheless, to create a constructive consequence for all events, the financing needed to be structured in a means that ensured not solely the transaction’s instant viability, however may additionally mitigate the dangers related to unsure market situations and potential regulatory hurdles. 

Pricing was a key characteristic of the deal’s success. ACP’s supply of $26.50 per share represented a 24% premium over Hollysys’ earlier month buying and selling worth of $21.38 in mid-June 2024. It was structured that means to offer most worth to Hollysys shareholders.

Consequently, the transaction met its efficiency targets. It closed on schedule and, in the end, all funds had been made in money – a testomony to the energy and reliability of Industrial Financial institution (HK department) monetary help and planning by ACP. As a part of this, the secure financing ensured the acquisition may present long-term strategic path, enabling Hollysys to concentrate on strengthening its place in China’s quickly rising automation business.

On the similar time, backed by Industrial Financial institution (HK department) structured mortgage, ACP because the fully-funded bidder may make a aggressive money supply, surpassing different bids in each worth and certainty. 

Navigating complexity and threat

Creating this sort of confidence and differentiation in ACP’s bid was a key step in overcoming varied challenges – from market competitors, to regulatory hurdles, to inside stakeholder issues. Briefly, the deal’s clean completion was largely as a result of strategic foresight of the bidder and its monetary companions.

Such an method was very important given the complexity of the bidding course of. As a compelling goal, Hollysys attracted multitude of unsolicited bids, every vying for consideration. Whereas some rumoured bids might have signalled greater headline worth factors, they had been shadowed by ambiguous financing preparations and extremely unsure funding sources and situations. Consortium members usually lacked a significant monitor file in executing acquisitions.

In contrast, ACP supplied deep sector data and expertise, respected underwriting requirements and dependable financing from Industrial Financial institution.

The financial institution additionally performed an necessary position in managing stakeholder expectations and associated dangers, stemming largely from Hollysys’ dispersed possession and lack of a controlling shareholder. 

By guaranteeing transparency all through the acquisition course of, ACP may mitigate the chance of post-deal disputes, particularly given the general public nature of Hollysys’ sale. 

A financing pioneer

In setting a brand new normal for structured finance offers within the area, Industrial Financial institution (HK department) revolutionary method with this deal spotlighted its capacity to offer customised options no matter scale.

But Industrial Financial institution (HK department) position went past financing. The deal demonstrated a strategic imaginative and prescient to determine Hollysys as a helpful asset and full the privatisation via considerate planning and execution as a part of a extremely aggressive bidding course of. This additionally enabled ACP to offer a complete resolution that addressed key priorities, together with optimising shareholder worth and securing long-term stability for the corporate.

Extra broadly, the result displays the crucial position of native monetary companions in massive and cross-border structured finance offers in China and past, significantly in navigating regulatory environments and market volatility.

¬ Haymarket Media Restricted. All rights reserved.