Industrial Bank (HK branch): taking a leadership | Asian Markets

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

This shortly grew to become clear when personal equity firm Ascendent Capital Companions (ACP) launched into the acquisition of Hollysys Automation Applied sciences, a main provider of automation and IT options in China – with a well-structured financial and strategic method that proved essential to the deal being finalised in July 2024.

The transaction set a new precedent within the Asia Pacific structured finance panorama. Notable was how it overcome the numerous challenges it posed for all events concerned, attributable to 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). Performing as sole financial arranger, the bank offered a $1.055 billion loan representing round 70% of the acquisition value – in flip guaranteeing this financing shaped the spine of the complete financial bundle.

Securing a extremely fascinating goal

Established in 1993, Beijing-based Hollysys had long been recognised for its dominant market presence and world-class R&D group in China’s aggressive industrial automation industry. But the company struggled with dispersed possession and a lack 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. 

Nonetheless, to create a optimistic final result for all events, the financing needed to be structured in a method that ensured not solely the transaction’s rapid viability, however may additionally mitigate the dangers related to unsure market circumstances and potential regulatory hurdles. 

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

As a end result, the transaction met its efficiency targets. It closed on schedule and, finally, all funds had been made in money – a testomony to the energy and reliability of Industrial Financial institution (HK department) financial help and planning by ACP. As half of this, the secure financing ensured the acquisition may present long-term strategic direction, enabling Hollysys to deal with strengthening its place in China’s quickly growing automation industry.

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

Navigating complexity and risk

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. In short, the deal’s clean completion was largely due to the strategic foresight of the bidder and its financial 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 could have signalled greater headline price factors, they had been shadowed by ambiguous financing preparations and extremely unsure funding sources and circumstances. Consortium members sometimes lacked a significant observe report in executing acquisitions.

Against this, ACP provided deep sector data and expertise, respected underwriting requirements and dependable financing from Industrial Financial institution.

The bank additionally performed an important 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 risk of post-deal disputes, particularly given the public nature of Hollysys’ sale. 

A financing pioneer

In setting a new normal for structured finance offers within the area, Industrial Financial institution (HK department) progressive method with this deal spotlighted its capacity to offer customised options regardless of scale.

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

Extra broadly, the end result displays the important position of native financial companions in giant and cross-border structured finance offers in China and past, significantly in navigating regulatory environments and market volatility.

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