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China Floormaker Raises $100 Million

BEIJING (Reuters) – China Flooring Holding Co received $100 million in funding on Tuesday from Morgan Stanley (MS.N: Quote, Profile, Research) and the International Finance Corp (IFC) and promptly set its sights on going public in Hong Kong.

Red-hot growth in China's real estate sector, driven by rapid urbanisation, has boosted demand for engineered and laminate flooring in recent years, making the sector a magnet for foreign capital.

The IFC, an arm of the World Bank that lends to the private sector, provided half of the funding for China Flooring, comprising $20 million in equity and $30 million in long-term debt.

The money will fund the development of plantation forests in Jiangxi province to provide raw materials for China Flooring, which sells its products under the “Nature” label.

“We wish to implement a global strategy for the brand,” Se Hok Pan, the firm's chairman, said at a signing ceremony. “Only global shareholders can help to create a global brand.”

The Guangdong-based company hopes the investment will pave the way for an initial public offering.

“The company is expected to be listed in Hong Kong in the second half of this year,” Zhong Xianwen, a public relations officer of China Flooring, said.

He said the size of the IPO had yet to be decided.

“As a strategic investor, we see a positive overall outlook for China's flooring industry,” said Sun Hong, a managing director at Morgan Stanley, the other strategic investor.

Morgan Stanley gave no details of its investment in China Flooring.

Other foreign investors that have tapped China's forest industry in recent years include Goldman Sachs (GS.N: Quote, Profile, Research), Citigroup (C.N: Quote, Profile, Research) and Carlyle Group [CYL.UL], said Zhang Senlin, director of the China National Forest Product Industry Association.

The output of China's forestry industry last year was worth 1 trillion yuan, data from the Ministry of Forestry show.

The investment is IFC's second in China's wood-products sector. As well as providing funding, the IFC will offer guidance on wood sourcing, help China Flooring develop appropriate procurement practices and identify new sourcing options, Richard Caines, an environmental manager with the IFC, said. ($=6.9230 yuan) (Reporting by Michael Wei; Editing by Alan Wheatley)