FountainVest in $92m PIPE deal

The Hong Kong-based firm will invest up to HK$720m for a minority stake in die-casting machine manufacturer L.K. Technology.

China-focused private equity firm FountainVest Partners is to invest up to HK$720 million (€67 million; $92 million) in Hong Kong-listed L.K. Technology, a die-casting machine manufacturer.

FountainVest has agreed to subscribe for a combination of new shares, perpetual convertible securities and warrants for HK$480 million, buying itself a 15.28 percent stake in the company. The firm is also entitled to invest up to HK$240 million in L.K. Technology’s subsidiaries, according to the company’s filing to the Hong Kong Stock Exchange.

Founded in 1985, L.K. Technology designs, manufactures and sells hot chamber and cold chamber die-casting machines, plastic injection moulding machines, and Computerized Numerical Control (CNC) machining centres.

“We believe that the company is uniquely positioned to capitalise on China’s rapidly growing domestic machinery industry, a key focus of the 12th National Five-Year Plan,” Frank Tang, CEO and managing partner of FountainVest, said in a statement.

Established in late 2007, FountainVest raised almost $1 billion for its maiden fund, FountainVest China Growth Capital Fund, in November 2008. Anchor investors in the fund include Singapore sovereign fund Temasek as well as Canadian pension funds Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers’ Pension Plan.

Asked about his prediction of 2011, Tang told PEI Asia at the end of last year that “the Chinese private equity market will remain hot, if not a bubble, with significant liquidity and new managers. Competition and valuation is becoming more challenging in an otherwise historically inefficient market. A private equity industry shakeout is bound to happen in the next two to three years.”