Stroller maker seeks new loans

The private equity owner of Goodbaby Group has called off the sale of China's largest baby stroller maker after prices came in too low, forcing the company to seek new loans to refinance its debt, sources said.

The planned sale of Pacific Alliance Group's (PAG) 67 percent stake in Goodbaby, which makes baby strollers and other products for infants for brands including Quinny, Nike Kids and Tommee Tippee, could be worth around $300 million.

Hong Kong-based PAG's investment in Goodbaby was China's first and rarely seen Western-style leveraged buyout (LBO) deal, completed in 2006 when PAG bought a 67 percent stake in Goodbaby for $122.5 million.

The sale, a rare opportunity for foreign investors to take a controlling stake in a Chinese consumer product leader, attracted interest from more than 20 companies, including Permira, TPG Capital, Morgan Stanley Private Equity Asia, Sweden's EQT Partners and Affinity Equity Partners, but all talks stalled over price, said sources familiar with the situation.

"There's a huge gap, at least 50 percent, between the seller's expectation and the offers it can get from some buyers," said one source.

"Meanwhile, it is a good company, a very well known Chinese brand, not something like a distressed asset, so the seller is definitely keen to get a good price tag for it," he said.

Early this year, PAG hired Morgan Stanley for advice on the planned sale of its stake in Goodbaby. Both Goodbaby and Morgan Stanley declined to comment. PAG was not immediately available for comment.

The source declined to be identified, saying the bidding process was confidential and private.

Lion's share

Goodbaby now controls nearly 70 percent of China's stroller market, and it makes two out of every five strollers sold in the United States, according to a recent Forbes magazine article.

Goodbaby is now seeking $33 million in three-year syndicated loans to refinance part of its debt via a special purpose vehicle called G-Baby Holdings Ltd, according to loan market sources.

Loan market sources said they believe Goodbaby's plan to re-enter the banking market for more loans came after it had difficulties finding a new owner to refinance its debt any time soon.

Loan market sources said the new three-year syndicated loans required by Goodbaby include two parts: a $23 million Term Loan A to partly refinance its outstanding debt of $57 million borrowed from banks in 2007, and a $10 million Revolving Credit B for its general corporate purposes,.

Loan A's maturity date is June 30, 2012, while Loan B's maturity date is Sept 30, 2012, the loan sources said.

Goodbaby is now undergoing the syndication process and is expected to complete it by early November, they said.

Private equity investment has a brief history in China, and the government is especially concerned about deals involving major or influential domestic companies.

Despite a lack of high-price bids from private equity investors, Goodbaby might attract interest from strategic buyers at home or abroad, the sources said, but added no deal for a strategic buyer to take over the company was likely to happen quickly.

Reuters

(China Daily 11/09/2009 page8)