TPG has entered into an agreement with Daphne International to invest RMB550 million ($81 million; €58 million) in the Chinese footwear company.
TPG and Daphne did not reply to requests for comment at press time.
Listed on the Hong Kong Stock Exchange, Daphne manufactures, markets and distributes footwear, apparel and accessories under its own and licensed brands. In China and Taiwan, the company currently operates more than 3,000 outlets, which carry brands including ladies footwear brand Daphne, Adidas and Nike. In 2008, it made HK$493 million ($64 million; €46 million) in net profit.
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The investment is structured as unsecured convertible bonds worth an estimated RMB550 million. Due in 2014, the bonds are convertible, subject to conditions, into ordinary shares at an initial conversion price of HK$3.50 per ordinary share.
In addition, TPG will receive 100 million warrants at an initial exercise price of HK$4 per warrant. Daphne will raise a further HK$400 million from TPG when the warrants are exercised in full. The warrants have a maturity of five years.
TPG will hold a stake of approximately 14.5 percent in Daphne assuming the bonds are fully converted and the warrants are fully exercised.
The capital raised will be used to expand Daphne’s Daphne and Shoebox store network in China. It will also be used for working capital.
Daphne will work with TPG to strengthen its financial management, operational efficiency and corporate governance. The company will also leverage TPG’s global network to explore new opportunities and boost its competitive edge, Chen Hsien Min, managing director of Daphne, said in a statement.
Daphne and TPG were respectively advised by banks Merrill Lynch and Nomura International.
In April, TPG offered investors in TPG Asia V, its latest Asia fund, to cut commitments by up to 10 percent or a total of $420 million. TPG Asia V closed on $4.25 billion in 2008. The firm’s investments from the fund include a 55 percent stake in India’s Shriram Retail Holdings for INR8.05 billion ($170 million; €121 million).