Summary of Proposed Investment
Project Number
11384
Company Name
Asian Strategic Investments Corp. Beijing Representative Office
Date SPI Disclosed
May 14, 2002
Country
China
Industry
Manufacturing
Projected Board Date
Jun 15, 2002
Status
Completed
Sector
Motor Vehicle Parts
Department
Gbl Ind, Manufact, Agribus & Services
Environmental Category
B - Limited
Previous Events
Approved : Jun 27, 2002
Signed : Feb 27, 2004
Invested : Mar 1, 2004
Project Description
The Group operates as an integrated entity supplying a wide range of automotive components (including foundry products, brake systems, diesel fuel injection systems, electrical products, and engine parts and accessories) to the Chinese and the international markets. In 2001, it had revenues of about US$160 million, EBITDA of US$25 million, and a net income of US$1.8 million. Total assets at the end of 2001 were US$400 million and shareholder funds were US$235 million (including equity and interest free shareholder loans).
The project is to establish a new company (Newco) which will acquire the Funds'' ownership of the Group, thereby converting the Group ownership to a corporate structure. The current fund ownership structure restricts the Group from upgrading existing operations, taking advantage of many new investment opportunities, and financing itself in an optimal manner. Through this ownership restructuring the Group will be able to effectively increase its value added, by allowing it to develop its franchise as a reliable and comprehensive supplier of quality auto components, and to leverage its management and manufacturing infrastructure.
The acquisition of the Funds'' ownership of the Group will be effected by the Limited Partners converting about 30% of their ownership interest into shares in Newco, and Newco purchasing the remaining 70%. The management of ASIMCO will become the management of Newco, and the ASIMCO staff that currently manage the operating units will be retained to manage the operations.
DEVELOPMENT IMPACT
The proposed project is expected to contribute to the transformation and rationalization of the industry, which has traditionally been dominated by inefficient state-owned enterprises. This is all the more important as China''s entry into the WTO is likely to have a significant impact on the automotive component industry in China, both in terms of challenges and opportunities. Through the project, IFC will support a group of restructured SOEs, who can become successful examples of China''s restructuring and privatization process.
The Group has been a pioneer in introducing modern management techniques, while relying on local managerial talent for plant operations. This has resulted in significant welfare benefits for local staff and the strengthening of local managerial skills and capacity. The Group was named one of the "Ten Best Employers in China" as part of the "Best Employers in Asia" study conducted by the Asian Wall Street Journal, The Far East Economic Review and Hewitt Associates. The Group possesses the management ability to provide leadership in the Chinese automotive components sector with regard to EHSS performance - and can drive these issues down to the next level of the supply chain pyramid, thus enhancing the development impact of the project.
IFC ROLE
IFC''s assistance is targeted at supporting privatization and restructuring of the automotive component industry to better prepare it to meet the challenges of a more competitive market environment following WTO entry. In the absence of IFC support, the restructuring of the Group is unlikely to move ahead, as the current diffused ownership structure and the diverse interests and objectives of the many parties involved make it difficult to agree and implement an appropriate strategy. Moreover, IFC''s presence in the transaction is likely to be a source of comfort for co-investors which include development agencies and private investors.
By assisting the Group in formalizing a performance based environmental management system, IFC is likely to play a vital role in improving its operating efficiency and in enhancing their ability to attract "global customers" that typically have environmental performance requirements for their suppliers. IFC will also continue to assist the Group with the identification of potential environmental technology products, for which there is strong demand in China.
Finally, IFC will assist Newco in adopting best corporate governance policies and practices.
The project is to establish a new company (Newco) which will acquire the Funds'' ownership of the Group, thereby converting the Group ownership to a corporate structure. The current fund ownership structure restricts the Group from upgrading existing operations, taking advantage of many new investment opportunities, and financing itself in an optimal manner. Through this ownership restructuring the Group will be able to effectively increase its value added, by allowing it to develop its franchise as a reliable and comprehensive supplier of quality auto components, and to leverage its management and manufacturing infrastructure.
The acquisition of the Funds'' ownership of the Group will be effected by the Limited Partners converting about 30% of their ownership interest into shares in Newco, and Newco purchasing the remaining 70%. The management of ASIMCO will become the management of Newco, and the ASIMCO staff that currently manage the operating units will be retained to manage the operations.
DEVELOPMENT IMPACT
The proposed project is expected to contribute to the transformation and rationalization of the industry, which has traditionally been dominated by inefficient state-owned enterprises. This is all the more important as China''s entry into the WTO is likely to have a significant impact on the automotive component industry in China, both in terms of challenges and opportunities. Through the project, IFC will support a group of restructured SOEs, who can become successful examples of China''s restructuring and privatization process.
The Group has been a pioneer in introducing modern management techniques, while relying on local managerial talent for plant operations. This has resulted in significant welfare benefits for local staff and the strengthening of local managerial skills and capacity. The Group was named one of the "Ten Best Employers in China" as part of the "Best Employers in Asia" study conducted by the Asian Wall Street Journal, The Far East Economic Review and Hewitt Associates. The Group possesses the management ability to provide leadership in the Chinese automotive components sector with regard to EHSS performance - and can drive these issues down to the next level of the supply chain pyramid, thus enhancing the development impact of the project.
IFC ROLE
IFC''s assistance is targeted at supporting privatization and restructuring of the automotive component industry to better prepare it to meet the challenges of a more competitive market environment following WTO entry. In the absence of IFC support, the restructuring of the Group is unlikely to move ahead, as the current diffused ownership structure and the diverse interests and objectives of the many parties involved make it difficult to agree and implement an appropriate strategy. Moreover, IFC''s presence in the transaction is likely to be a source of comfort for co-investors which include development agencies and private investors.
By assisting the Group in formalizing a performance based environmental management system, IFC is likely to play a vital role in improving its operating efficiency and in enhancing their ability to attract "global customers" that typically have environmental performance requirements for their suppliers. IFC will also continue to assist the Group with the identification of potential environmental technology products, for which there is strong demand in China.
Finally, IFC will assist Newco in adopting best corporate governance policies and practices.
Sponsor / Cost / Location
Development Impact
Related ESRS/ERS
Contacts
For Inquiries About the Project, Contact
Michael Cronin
Phone: (8610) 6438-2750 ext 229
Fax:(8610) 6438 2735/6 ]
Email: henryh@asimco.com.cn
Phone: (8610) 6438-2750 ext 229
Fax:(8610) 6438 2735/6 ]
Email: henryh@asimco.com.cn