Morgan Stanley Private Equity Asia (MSPEA) has agreed to make a USD100 million equity investment for a significant minority ownership stake in China XD Plastics Company Limited, one of China’s leading players engaged in the development, manufacture, and sales of modified plastics primarily for automotive applications, subject to certain customary closing conditions. The investment by MSPEA will help China XD Plastics to expand and further upgrade its production capabilities.
Under the terms of the transaction, MSPEA will purchase redeemable convertible preferred shares of the Company at an aggregate purchase price of USD100 million. The redeemable convertible preferred shares are convertible into common stock of the Company at an initial conversion price of USD6.25 per share, subject to customary anti-dilution adjustments. Holders of the redeemable convertible preferred shares will participate in common stock dividends on an as-converted basis. In connection with the transaction, MSPEA will designate two members to be elected to the board of directors of the Company (the "Board"), and the number of directors constituting the Board will be increased from seven to nine. Six of the nine directors will be considered independent for the Board under the rules of the Securities and Exchange Commission and the Nasdaq Stock Market.
"We are delighted to announce our partnership with MSPEA and believe that this investment reflects their confidence in the quality of our business and the significant growth prospects of our market," says Jie Han, Chairman and CEO of China XD Plastics. "This investment will enable us to accelerate our domestic capacity expansion and production line upgrade plans and invest in developing new products to better satisfy the demand for our products in the market. MSPEA brings international best practices and financial and capital markets expertise as well as a track record of over 18 years of success in guiding and supporting companies to achieve their strategic and financial goals. Our management team looks forward to working closely with MSPEA to further strengthen our position as an industry leader."
Ed Huang, a Managing Director of Morgan Stanley Private Equity Asia, stated, "MSPEA has a disciplined strategy of investing in market-leading businesses with high-quality management teams and compelling competitive advantages. We see the automotive modified plastics market in China as having attractive long-term growth prospects and China XD Plastics as having established itself as a strong and leading player in this space. We are impressed by the Company’s product development and production management capabilities as well as its experienced management team. We look forward to being a long-term partner and shareholder of China XD Plastics."
China has grown rapidly to become the largest automobile market in the world and continues to experience significant and growing demand for high-quality modified plastics. China XD Plastics is one of the largest domestic modified plastics players in China, with 165,000 tons of production capacity and one of the largest portfolios of product certifications in the automotive modified plastics industry, achieving 193 product certifications, as of June 30, 2011.