Chinese conglomerate Citic Ltd. has teamed with Kohlberg Kravis Roberts & Co. (KKR) - Get Report to take control of Singaporean water, waste-water and environmental services company United Envirotech Ltd. through an offer which values the stock at S$1.9 billion ($1.5 billion).
Citic will become the largest shareholder in United Envirotech after the S$1.65-per-share offer, while KKR, which already owns 29.7% after the conversion of a tranche of bonds, will be the No. 2.
The companies aim to make a voluntary offer for all the shares and to subscribe for up to S$150 million of shares in a private placement at the same price. They plan to retain United Envirotech's Singapore listing. The S$1.65-per-share offer is 12.6% more than United Envirotech's closing price on Nov. 6, the last full trading day before the announcement. United Envirotech shares closed up 3.4% at S$1.515 in Singapore on Wednesday.
Citic Vice Chairman and President Wang Jiong noted that the company "provides a strong platform to develop in China's water and wastewater treatment sector."
Citic and KKR are making their offer through a Cayman Islands special purpose vehicle. Irrevocable undertakings from shareholders including United Envirotech Chief Executive Officer Lin Yucheng and Chief Investment Officer Pan Shuhong take the bidders' holding to 51%, the majority stake the offer is conditional upon. KKR also owns convertible bonds equivalent to another 10.2% stake. It won't be making an additional investment in United Envirotech for the offer, it said.
United Envirotech has been listed since 2004 and became a KKR portfolio company in August 2011, when the New York firm invested $113.8 million in convertible bonds. It bought $40 million of shares in January 2013.
The Singaporean company's customers include China Petrochemical Corp. and China National Offshore Corp.
United Envirotech on Tuesday reported a 145% increase in second-quarter net profit to S$18 million and a more-than doubling of revenue to S$105.4 million.
The bid is conditional on various clearances from the Chinese government, for which the deadline is May 11. The share placing requires clearance from the Singaore Exchange, United Envirotech shareholders and the endorsement of an independent fairness opinion, which is expected around February.
The companies plan to make a formal offer announcement by May 18.
If the offer and placement pan out as expected, Citic will emerge with a 50.6% to 67.4% stake in United Envirotech, and KKR will hold between 23.8% amd 36.2%.
Rothschild's Rohit Elhence is advising the bidders. Paul, Weiss, Rifkind, Wharton & Garrison LLP's Jack Lange, Mable Law and Maggie Chen provided legal advice to KKR. Citic's legal adviser was Rajah & Tann Asia, and United Envirotech took advice from Shook Lin & Bok LLP.