China Agritech, an organic fertilizer manufacturer and distributor in China, has closed a private placement with Carlyle Asia Growth Partners, the growth capital arm of The Carlyle Group, of 1,392,768 shares of China Agritech common stock and warrants to purchase up to an additional 928,514 shares for aggregate gross proceeds of USD15m.
As a result of the transaction, The Carlyle Group, through its affiliates holds approximately 16.5 per cent of the issued and outstanding China Agritech common stock.
In the event that the company does not meet a net income target of USD11.5m for fiscal year 2009, The Carlyle Group affiliates will be issued additional shares of common stock and the initial warrant exercise price of USD10.77 per share will be reduced, thereby resulting in additional warrant shares being issuable upon exercise of the warrants.
The proceeds from the private placement will be used for business expansion and working capital purposes.
The stockholders of China Agritech, acting by majority consent in lieu of a stockholders’ meeting, approved the transactions contemplated by the securities purchase agreement, including the issuance of the shares of common stock and the warrants, as required by Nasdaq Marketplace Rule 5635.
As part of the securities purchase agreement, The Carlyle Group has the right to appoint one director to the board of directors and, as a result, the board of directors will be expanded to have six members. The Carlyle Group also has the right to invest between USD5m to USD10m in any additional financing by the company undertaken during the one-year period commencing on the closing date.
Yu Chang, chairman and chief executive officer of China Agritech, says: "This strategic investment by a prestigious investment firm like The Carlyle Group, strengthens our shareholder base. We believe their investment is an endorsement of our strategic plans and our ability to generate shareholder value. With the new financial and global resources from Carlyle, we will be able to accelerate our growth plans to further penetrate the large fertilizer market in China and strengthen our leadership position in our industry. We look forward to the strategic assistance Carlyle will provide to help us reach our long-term goals."
Wayne Tsou, managing director and head of Carlyle Asia Growth Partners, adds: "We are excited to establish a strategic relationship with China Agritech and broaden our reach to the agricultural industry, one of the pillar industries of China. Under the leadership of a capable management team, China Agritech has built a successful track record and is poised for accelerated growth in the years ahead. We are dedicated to providing global resources and expertise to support China Agritech’s further expansion."
