Japanese trading company Mitsui is buying up to 20% of Hong Kong-based display products company TPV Technology, as part of a deal that will also see TPV's controlling shareholder, China Electronics Corporation (CEC), increase its stake.
Beijing-based CEC, a Chinese state-owned enterprise, already owns 27% of TPV. According to an announcement issued late last Friday, it will buy an additional 200 million TPV shares, representing 9.47% of the share capital, for a total of HK$1.04 billion ($134 million), or HK$5.20 per share. The seller is Dutch firm Royal Philips Electronics, which will continue to own 63 million shares, representing 3% of TPV's existing share capital.
Mitsui will subscribe to 234 million new shares of TPV at the same price of HK$5.20 per share, which represents 10% of the enlarged share capital. It may later buy additional shares through a general offer up to a maximum of 20%. Mitsui's share purchase will give TPV HK$1.2 billion of new funding which it said it will use for working capital. The shares being issued to Mitsui have a two-year lock-up.
The agreed price represents a premium of 6.56% over TPV's closing price on the Hong Kong stock exchange last Thursday (January 28) and a premium of 4.41% over the closing price for the 30 days up until that same day. It also marks a premium of 2.97% to the company's net asset value per share as per December 31, 2008, the most recent audited full-year results.
CEC and Mitsui will together control 43% of the enlarged share capital of TPV through the transactions described above and including CEC's existing stake. In compliance with the listing rules in Hong Kong and Singapore (TPV is listed in both these markets), CEC and Mitsui will also offer to acquire the remaining shares from minority shareholders. The total consideration for that offer, assuming all outstanding TPV options are exercised prior to the record date, is HK$6.7 billion, which will be shared between the two parties. CEC will pay HK$5.5 billion and Mitsui the balance of HK$1.2 billion.
The shares tendered in the general offer will be apportioned between CEC and Mitsui. If CEC and Mitsui reach a combined 50% shareholding in TPV via the Philips sell-down, the subscription of new shares and the general offer, CEC will own 35% and Mitsui 15%. Over and above this, shares will be allocated in such a way that Mitsui owns a maximum of 20% of TPV.
CEC and Mitsui intend to maintain TPV as a listed company in both Hong Kong and Singapore.
TPV was started in 1998 and makes monitors for personal computers and LCD televisions. The company had sales of $9.2 billion for the year ending December 31, 2008. Mitsui, one of Japan's largest trading companies, has been supplying LCD modules and other parts to TPV for many years. This investment improves Mitsui's reach in the LCD market and provides TPV with the opportunity to win outsourcing orders from TV brand holders.
CEC said it is increasing its stake in TPV to facilitate the integration of TPV's LCD business with its own and also to support TPV in the Chinese market.
Mitsui is being advised by Morgan Stanley, with legal advice from Clifford Chance. CEC is advised by China International Capital Corp. TPV has yet to appoint an independent financial adviser.
TPV shares, which were suspended on Friday pending the announcement, resumed trading yesterday and gained 5.5% to close at HK$5.15.
