Morgan Stanley and the International Finance Corp (IFC) – a member of the World Bank – have acquired a 14.33 percent stake in Anhui Conch, China’s largest cement producer, for $200 million (€165 million).
The two organisations paid around eight yuan a share, with Morgan Stanley taking a 10.51 percent interest and the IFC 3.82 percent.
In the first quarter of last year, Anhui Conch saw profits plummet more than 80 percent amid over-capacity in the sector and government restrictions on new buildings.
Since September 2005, however, the firm’s share price has shot up 40 percent amid the perceived bottoming out of the cement industry and the anticipation of strong performance in 2006.
According to a report in the South China Morning Post, Morgan Stanley declined to use the traditional method of an offshore structure to acquire the company. Instead, they bought non-tradable “legal person” shares from Anhui’s parent company, which is owned by the government and is retaining a 35.24 percent stake.
The deal is still awaiting the approval of regulators.
Formed in 1997, Hong Kong-listed Anhui Conch is engaged in the development, production and sale of middle and high-grade cement and clinker. Its products have been used in a number of high-profile infrastructure developments in Shanghai including the Oriental Pearl television tower and Hongqiao airport.
Established in 1956 and part of the World Bank Group, the Washington DC-based IFC is the largest multilateral source of loan and equity finance for private sector projects in the developing world.