China’s Sany Group plans $2 billion spin-off, taps PE firms, say sources: Reuters

China’s leading heavy machinery maker Sany Group [SANYG.UL] plans to spin off four business units and is looking to rope in private equity (PE) firms as investors for the deal that could fetch a total of $2 billion, sources told Reuters.

Sany’s advisers have reached out to firms such as global investment powerhouses Bain Capital, Carlyle Group, CVC Capital Partners and KKR & Co (KKR.N) for the deal, the sources said, adding the first round of bids were due in the coming days.

The firm’s hunt for a deal comes at a time when Asia has become a major battleground for global financial sponsors. A total of 342 funds raised a combined $107 billion in the region last year, according to data provider Preqin.

In China particularly, financing activity is expected to improve as Beijing pours funds into infrastructure projects and eases borrowing curbs on local governments to soften the blow to the economy from a mounting Sino-U.S. trade spat.

Sany is looking to sell the units, including those making oil cylinders and gear reducers, individually or together, and use the proceeds to cut its debt, one of the sources said.

The group, led by billionaire Liang Wengen, could not be reached for comment. The investor relations office at Sany’s Shanghai-listed entity, Sany Heavy Industry Co. (600031.SS), said it was not aware of such information.

Carlyle (CG.O), which in June said it had raised $6.55 billion for its Asia PE fund, its biggest ever, declined to comment on a potential spin-off by Sany.

Bain and CVC, which are planning to raise new Asia-focused funds according to industry sources, declined to comment.

KKR declined to comment. It closed a new Asia-focused buyout fund in mid-2017 after raising $9.3 billion, a record for the region at the time.

The sources, who have knowledge of the matter, could not be identified as the information is not yet public. They also declined to elaborate on the details of the spin-off.

Founded in 1989 in central China’s Hunan province, Sany is a diversified engineering machinery manufacturer, with products including concrete machinery, excavator, crawler cranes, truck cranes, pile driving machinery and road construction machinery.

Sany has more than 100 offices globally with R&D centers and manufacturing bases in United States, Germany, India and Brazil.

Sany does not report its financials at the group level.

Debt at its Shanghai-listed entity amounted to 19 billion yuan ($2.76 billion) by March this year, according to a bond ratings report. Sany Heavy Industry has a 56 percent debt-to-asset ratio and had three-times total debt to EBITDA in 2017.