Kohlberg Kravis Roberts has agreed to invest $113.8 million in convertible bonds of Singapore-listed Chinese water treatment firm United Envirotech (UEL), as the U.S. private equity fund seeks to tap the mainland’s fast-growing water treatment industry.
The 2.5 percent coupon convertible bond investment will have a five-year tenure and could be converted into equity shares at a conversion price of S$0.450 per share, a 29 percent premium to UEL’s Friday close.
UEL shares jumped 8.6 percent on the news.
UEL, with a market value of $139 million, provides engineering services using membrane technology to municipal and industrial waste-water treatment projects in China. It also operates a portfolio of waste-water treatment plants across China.
China provides huge potential for growth in water-related business, as the per capita water resources in China are less than one third of the world’s average, according to the latest World Bank statistics, the companies said in a joint statement.
“In addition to bringing in capital to support our growth, KKR’s global network, strong operational capabilities and extensive local knowledge will add significant value to our future development,” Lin Yucheng, Chairman and CEO of UEL, said in the statement.
KKR’s planned investment in UEL comes at a time when several overseas listed Chinese companies have come under intense scrutiny due to alleged accountancy-related frauds. As a result, shares in some of these companies have taken a beating, making them attractive to potential buyouts, banking sources say.
By applying advanced membrane technology in waste-water treatment and recycling, companies like UEL provide a viable solution to water shortage and pollution problems, supporting sustainable and environmentally friendly development of the economy, the statement said.
Stirling Coleman Capital Limited is the arranger for the transaction and Credit Suisse (Singapore) Limited is the financial adviser of KKR.
