Oaktree Capital Management LLC, a US buyout firm with US$40 billion in assets, plans to take over Fu Sheng Industrial Co (
The buyout firm will offer NT$37.50 in cash for each Fu Sheng share, or 14.3 times the Taipei-based company's per-share profit last year, a press release said. The transaction values Fu Sheng at NT$33 billion including debt, it said.
NEW TO TAIWAN
The buyout would be Oaktree's first in Taiwan, where the benchmark stock index rose 3 percent this year, underperforming a 6.6 percent gain in the Morgan Stanley Capital International Asia-Pacific Index. Taking the company private will allow Oaktree to better deploy capital and help Fu Sheng expand overseas, the US firm said.
"We offer a very full price," said Bill Kerins, managing director of Oaktree, in a phone interview. "There is something we think we bring to the table in terms of taking a good, strong Taiwanese company global. That's best done as a private company."
Oaktree will team up with Lee Hou-teng (李後藤), founder and chairman of Fu Sheng, for the takeover and plans to expand the Taipei-based company's businesses in Europe and the US, Kerins said. Fu Sheng will be delisted from Taiwan's stock exchange after the takeover is completed.
The tender offer, valid for 50 days, must be approved by 51 percent of shareholders and the government, the release said. Lee and his family agreed to tender their combined 46.8 percent stake.
Shares of Fu Sheng rose 6.91 percent to close at NT$36.35 on the Taiwan Stock Exchange after the announcement. The offer is 10 percent higher than the stock's closing price yesterday. Shares have dropped 4.3 percent in the past 12 months, compared to the 9.9 percent gain in Taiwan's benchmark index.
"Over the last three years, the stock has not performed well," Kerins said. "Investors in the market are pretty focused on short-term earnings, while we're focused on long-term opportunities."
RIVALS
The offer values Fu Sheng higher than rivals Advanced International Multitech Co (
Fu Sheng was trading at 13.6 times its earnings today, Bloomberg data showed.
"It may be a good time for shareholders to exit as the offer price is fair," said Michelle Cheng, an analyst at BNP Paribas Securities in Taiwan.
The golf business' profit has been hurt by higher costs, though this year's second half may improve because the price of titanium, used in golf-club heads, has stabilized, she said.
Fu Sheng, which Lee established in 1953, derives more than half of its sales from making golf-club heads, producing 15 million a year. It is also the biggest maker of industrial air compressors in China, Hong Kong and Taiwan, the release said. Sales totaled NT$25.7 billion last year.
"The air compressor business is more promising because they're already tapping growing electricity demand from China and have been getting orders from the US," Cheng said.
Atlas Copco AB, the world's biggest maker of air compressors, trades at 23 times its profit and US-based Gardner Denver Inc at 15 times.
Lee and his family agreed to reinvest a "substantial portion" of the proceeds from selling their shares in a new Taiwan holding company that will own all of Fu Sheng, the release said. The Lee family will hold a similar stake in the new company as they did in Fu Sheng, it said.
JPMorgan Chase & Co advised Los Angeles-based Oaktree on the transaction.
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