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The eBearing News
July 12, 2004
Shanggong Steps Away
from INA/FAG Acquisition
copyright © 2004 eBearing Inc.
Shanggong Co. Ltd. (China) said it has decided to delay indefinitely its acquisition of
Duerkopp Adler AG (Germany, a subsidiary of INA Holdings AG, Germany). The reasons cited by Shanggong were
unclear, although eBearing has been told Shanggong unilaterally reopened negotiations and is seeking a
lower purchase price.
Duerkopp Adler, INA's industrial sewing machine and conveyor systems subsidiary, came to be part of the
business when it
acquired FAG Kugelfischer Georg Schafer AG. FAG had been trying to sell off Duerkopp Adler since at
least 2000, after a significant turnaround effort succeeded in returning Duerkopp to profitability.
Today we think of FAG as a bearing company, but in fact it all started as a sewing machine repair shop
in the late 1800's.
2000 article: FAG divesting Duerkopp Adler
Plans to sell off Duerkopp Adler were scrapped in the wake of its return to profitability, lack of interested
acquiring partners, and FAG management's distraction by the hostile takeover bid from INA.
The Duerkopp divestiture was finally orchestrated in 2003, INA agreeing to sell off the sewing machine
division to Shanggong so it could refocus on its core bearing and industrial components businesses.
2003 article: Shanggong acquiring Duerkopp Adler
Shanggong is the largest industrial sewing machine producer and exporter in China, with company-wide
sales approaching USD $100 million. It has been publicly
traded since 1994. The company's subsidiary, Shanggong Import & Export Co. Ltd., was set up in 1997 for
international trade; one of its product lines is bearings.
In order to pay for the acquisition, Shanggong filed to issue 100 million "B" shares in a placement
worth approximately $50 million. Essentially, "B" shares are a device which regulators in China
use to allow foreign investment in Chinese companies. Shanggong's was the first major "B" share issue
in almost two years.
Shanggong told regulators prior to the "B" share placement that it would be using essentially all
of the proceeds to buy Duerkopp Adler.
2003 article: INA finalizes Shanggong share acquisition
As an INA division, FAG apparently bought $12 million worth in May 2004,
leading 13 other investors. Prior to this latest issue, Shanggong had three "B" shareholders,
all foreign-investment arms of private Wall Street banks.
Shanggong filings have variously shown INA/FAG acquiring all $48 million of its "B" shares
and a Duerkopp price of $24 million, to INA/FAG acquiring $24 million of its "B" shares to lead other
investors in a $48 million purchase price, to this latest showing INA/FAG acquired $12 million of the
"B" shares against the $48 million Duerkopp price.
In late 2003, Nantang Securities, the Shanghai-based underwriter, said, "The share placement will take place
as soon as possible. Using private placements and share swaps is an innovative tool to make
an acquisition in China."
An international business negotiator told eBearing, "This transaction may go through just fine, but then
again it may turn out to be another lesson to the international business community; doing complex
transactions in China is still tricky and still carries a high degree of risk."
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Bruce Carr edited this content.
Copyrighted material; unauthorized reproduction prohibited.
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eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2011, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
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