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The eBearing News
November 2, 2004
FAG and Shanggong
Restart Duerkopp Adler Deal
copyright © 2004 eBearing Inc.
FAG Kugelfischer AG (Germany, with INA Bearings, a division of INA Holding, Germany) and Shanggong
Co. Ltd. (China) have signed a formal sales contract for FAG's Duerkopp Adler division.
The sale arrangements were originally made public in early 2003, although both companies declined
to name the target of the acquisition at that time.
• article: Shanggong will invest $24 million with FAG
In late 2003, several observers pointed out the deal seemed to be moving slowly, as the companies
had only recently released details of the divestiture /acquisition. Several individuals close to the deal
told eBearing at the time that its structure was so unfamiliar to China's financial officials that
the normally slow bureaucracy slowed to a halt as central government policymakers examined it and
stalled making a decision.
• article: FAG finalizes deal to acquire interest in Shanggong
In July 2004, the deal was dealt a further setback when Shanggong inexplicably stepped away from the
table, stating it would indefinitely delay the Duerkopp Adler acquisition.
• article: Shanggong steps away from FAG acquisition
Chinese financial commentators said they believed the deal was stalled by the central government, while
others told eBearing the deal was stalled by Shanggong attempting to wrestle more money from FAG.
FAG now says the delay was caused by, "key personnel changes," at Shanggong.
Whatever the reason for the delay, the deal now stretching past the two year mark is apparently back
on track with another contract signing in Shanghai recently.
Duerkopp Adler is INA's industrial sewing machine and conveyor systems subsidiary, which 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.
• 2000 article: FAG decides to divest Duerkopp Adler
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.
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.
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.
An early statement by Nantang Securities, the Shanghai-based underwriter, could explain the
various delays: "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."
Successful completion of the acquisition still depends, as before, on receiving ultimate approval from a wide
variety of Chinese authorities, and Shangggong's ability to complete financing arrangements.
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Unauthorized reproduction is prohibited.
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eBearing.com ... for everything that moves™
Entire contents Copyright 1999-2009, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered
trademarks of eBearing Inc.
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eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2009, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
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