Baring Asia ends exclusive talks with Harbin Electric

The pan-regional investor had been lined up to back the take-private of the Chinese electric motors maker, along with CEO Tianfu Yang. It will now only fund up to 10% of the management buyout.

Baring Private Equity Asia will no longer be the sole source of financing for a take-private of NASDAQ-listed Harbin Electric, the Chinese electric motors maker said in a company statement.

Baring Asia and the company’s CEO Tianfu Yang have amended their previous agreement announced in October, in which the two parties agreed to “work together exclusively” to offer $24 per share for a management buyout, according to the statement.

In the amended agreement, Yang stated that Baring Asia’s participation in the management buyout will be limited to “a right, but not an obligation, to provide up to 10 percent of the financing” in the form of debt and/or equity.

In addition, while Yang will look for other sources of financing for the transaction, he still plans to take the company private at the previously proposed price of $24 per share. Goldman Sachs continues to serve as financial advisor to Yang.

Baring Asia declined to comment.

Law firm Howard G. Smith, which was investigating the fairness of the take-private proposal on behalf of shareholders, valued the cash transaction at around $752 million in October. Yang currently owns 31.1 percent of Harbin’s common stock.

The company noted in the statement that the special committee of the board of directors formed to evaluate the take-private proposal will also review other strategic alternatives for Harbin Electric.

Headquartered in Harbin, China, Harbin Electric is a developer and manufacturer of electric motors. Its major product lines include industrial rotary motors, linear motors, and specialty micro-motors. The company operates four manufacturing facilities in China located in Xi'an, Weihai, Harbin, and Shanghai.

Currently, Hong Kong-based Baring Asia is targeting commitments of $1.75 billion for its latest fund, Baring Asia Private Equity Fund V, a source told PEI Asia in July.

Baring Asia Private Equity Fund IV closed on over $1.5 billion in May 2008, surpassing its $1 billion target. The fund received re-ups of 154 percent from existing investors and drew commitments from another 40 institutional investors, the firm said at the time of the predecessor fund’s close.