Polyester chips maker JBF Industries has acquired 100% control over its Singapore arm JBF Global Pte Ltd (which, in turn, is a holding Company of JBF RAK LLC, UAE) by acquiring all of Citigroup Venture Capital's (CVCI) equity in the Singapore firm for $104.41 million.
JBF Industries had early this year said, it was buying out two-thirds of total convertible holdings of CVCI in JBF Global Pte Ltd, Singapore for approximately $60 million. This means CVCI generated 38% return on its three-year-old investment, not counting dividend earnings.
In a recent interview to CNBC, Rakesh Gothi, MD of the firm, had said that Citigroup Venture Capital International (CVCI) had injected $75 million into JBF Global subsidiary at Singapore for acquiring a stake of 33% in that subsidiary in December 2007. JBF Global Singapore has a 100% holding in JBG RAK, the UAE subsidiary.
“Since then, we have bought over 22% of CVCI stake that is about $50 million worth at a price of $62 million. In October end, we got the board approval for acquiring the balance 11% stake and hence we have decided to acquire it (the balance 11% which was their investment of around $25 million) at a price of around $40 million,” he had said in that interview.
Of the total amount, $30 million is by way of borrowings and the balance would be through internal accruals, Gothi had said. According to him, the exceptional performance of JBF RAK unit at UAE is the reason why the company was looking at a 100% holding in JBF Global Singapore.
JBF had entered into a memorandum of understanding with CVCI in July 2007 wherein the PE firm was slated to bring in $118 million in the Singapore arm through fully convertible securities. The entity was to use the funds to expand international business of the company by acquiring or investing in overseas projects.
However, CVCI had apparently raised its commitment and as per an agreement signed in December’07 (just before the stock market crash in January’08), it would invest a total for $125 million. Of this, it had already invested $75 million as the first tranche and was to bring in the remaining money soon after. It appears CVC never brought in the second tranche.
CVCI has also been on an exit mode from the parent company in India. In July, it sold 14.3% of its 20.4% stake in JBF Industries after selling a small chunk of shares in the three months to end June. In an open market deal, it sold shares worth Rs 120 crore. It made almost 3x on its five-year-old investment selling shares at Rs 135.1 per share compared to investment cost of Rs 46.5 per share in June 2005 when it invested through preferential allotment and warrants.
As of September 30, CVCI still owned 5% stake that is worth Rs 68.7 crore as of Thursday.
According to data available, the JBF stock had outperformed the market over the past one month till November 16, 2010, rising 4.46% compared with the Sensex`s 1.29% decline. It outperformed the market in past one quarter, gaining 38.63% as against 10.05% rise in the Sensex. Recently the company reported rise of 69.78% in standalone net profit on y-o-y basis to Rs 421.40 million, while total income rose 25.90% y-o-y basis to Rs 8.69 billion for the quarter ended September 2010.