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KPS’ HHI Forms China JV

KPS Capital Partners’ HHI Group Holdings LLC, maker of forged automotive parts, will enter into a joint venture with Zhejiang 8+1 Precision Machinery Co. and C&U Americas, LLC to form Mapleland Precision Forge Co. Ltd. HHI Group, formerly named Hephaestus Holdings, has completed numerous deals and recaps since KPS’ initial investment.

PRESS RELEASE:

New York, NY (May 2, 2011) – HHI Group Holdings, LLC (“HHI”), the leading manufacturer of forged parts for the North American automotive industry, announced today an agreement with Zhejiang 8+1 Precision Machinery Co. (“8+1”) and C&U Americas, LLC (“C&U”) to form Mapleland Precision Forge Co. Ltd. (“Mapleland”), a new joint venture company that will manufacture highly-engineered wheel-end bearing and transmission components for customers in China and Greater Asia. HHI will own 25% of Mapleland.
HHI’s contribution to the joint venture will consist of three state-of-the-art Hatebur AMP70 high-speed hot forging machines, commonly recognized as the most efficient and technologically advanced forging equipment. Once these world-class machines, together with HHI’s proprietary technical expertise and process know-how, are transferred to Mapleland, the company will possess a significant competitive advantage in the Chinese automotive forging market. HHI retains sufficient capacity to supply forgings to the North America automotive market even at peak historical light vehicle production levels.
The formation of Mapleland will enable HHI to capitalize on significant growth opportunities presented by the Chinese and Asian automotive markets and to supply 8+1’s broad customer base in China and will create the opportunity for HHI to provide further support to its customers which have manufacturing facilities located in China. It is anticipated that Mapleland will open a new facility in Huzhou City, Zhejiang Province, near 8+1’s existing forging and machining park. The facility is scheduled to begin production by the fourth quarter of 2012.
George Thanopoulos, Chief Executive Officer of HHI, and Michael Crosby, Chief Executive Officer of C&U, jointly commented, “We are very excited to create this partnership between our companies. Mapleland will begin operations with enormous manufacturing capacity to serve the Chinese market with industry leading equipment and world–class forging expertise. This initial phase of cooperation focused initially on high-speed hot forgings will pave the way for potential future collaboration in other product areas such as wheel bearings.”
HHI was solicited by numerous leading forging and bearing manufacturers in China with respect to the establishment of a joint venture, but selected 8+1 because of its extensive technical forging and machining expertise, knowledge of the local markets, and substantial customer base including many bearing manufacturers.
Formation of the joint venture is subject to Chinese governmental approval.
About HHI Group Holdings, LLC
HHI is the largest independent manufacturer of highly-engineered symmetrical and asymmetrical forged parts for various power train and wheel-end applications, a leading manufacturer of wheel bearings, and one of the few manufacturers of engine timing drive systems for the North American automotive industry. The company operates through its Jernberg Holdings, LLC, Impact Forge Group, LLC, HHI FormTech, LLC, Kyklos Bearing International, LLC (“KBI”) and Cloyes Gear and Products, Inc. subsidiaries. With over 2,700 employees, HHI is headquartered in Royal Oak, Michigan and operates 14 manufacturing facilities located in Arkansas, Illinois, Indiana, Michigan and Ohio. For more information, please visit www.hhigroupholdings.com.
About KPS Capital Partners, LP
KPS Capital Partners, LP is the manager of the KPS Special Situations Funds, a family of private equity funds with over $2.6 billion of committed capital focused on constructive investing in restructurings, turnarounds and other special situations. KPS has created new companies to purchase operating assets out of bankruptcy; established stand-alone entities to operate divested assets; and recapitalized highly leveraged public and private companies. The KPS investment strategy targets companies with strong franchises that are experiencing operating and financial problems. KPS invests its capital concurrently with a turnaround plan predicated on cost reduction, capital investment and capital availability. Typically, the KPS turnaround plan is accompanied by a financial restructuring of the company’s liabilities. The KPS investment strategy and portfolio companies are described in detail at the firm’s website: www.kpsfund.com.