Warburg Pincus secures syndicate loan for China buyout

Warburg Pincus and a Chinese investor have secured a syndicated loan to acquire Shandong Deosen Corp, a producer of food additive in China, in a rare leverage buyout in that market.

Warburg Pincus, a US private equity firm, and a Chinese investor have secured a syndicated loan to advance the acquisition of China’s Shandong Doesen Corp., a producer of xanthan gum, a food additive, in a transaction worth $181 million.

Deutsche Bank and Standard Bank led the financing for the leveraged buyout, said a source close to the deal. Warburg Pincus declined to comment on the transaction.

Deutsche and Standard Bank were later joined by seven other banks, according to a Reuters report quoting an unnamed source.

The other banks are ING, BNP Paribas, Bank of East Asia in Hong Kong, Overseas Chinese Banking Corp of Singapore, Moscow Narodny, Japan’s Aozora Bank and Korea’s Hana Bank.

China’s Ministry of Commerce had asked for the financing to be sorted out before it approved the rare leveraged buyout.

Reuters called the private equity transaction as the first syndicated leveraged buyout in China.

The Carlyle Group’s acquisition of an 85 percent stake in Xugong Construction Machinery Co, previously hailed as the first significant buyout in China, has yet to gain regulatory approval.

In 2004, CCMP Capital Asia, the private equity spin-out of JP Morgan, bought a mainland model train manufacturer. The company made most of its earnings offshore, and was not considered a mainland China buyout, according to Brett King, a partner at law firm, Paul Hastings.

Warburg Pincus is also pursuing a stake in Beijing Wangfujing Departmental Store, a Chinese departmental store operator, in a transaction estimated to be worth $188 milllion.