Vinda International [HKG:3331] founder and Chairman Li Chao-wang is in talks with banks for a roughly USD 1.5bn loan to fund a possible management buyout (MBO) of Essity’s [STO:ESSITY-A] majority stake in the Hong Kong-listed tissue-and-diaper maker, said four sources familiar with the matter.
Global private equity firms are also considering various scenarios to make an offer for Essity’s Vinda stake and the buying consortium could end up including Li and private equity partners, the first two sources said.
If Chairman Li or a consortium completed a deal to buy Essity’s majority stake in Vinda, it would trigger the need for the buyer to make a general offer at the same share price to the rest of the shareholders unless a special waiver is obtained.
Chairman Li, who currently has a 21.04% stake in the USD 3.25bn-market cap tissue paper giant, has held talks with several banks with long-term relationships with the company, and at least two European banks have submitted financing proposals, but no mandate has been awarded, said the first three sources.
Sweden-based and listed hygiene product maker Essity owns a 52% stake in Vinda.
Guangdong, China-based Vinda’s principal bankers are Bank of China, BNP Paribas, China Construction Bank, Citibank, DBS Bank, Hang Seng Bank, Industrial and Commercial Bank of China, Standard Chartered Bank (Hong Kong) and Skandinaviska Enskilda Banken AB, the Hong Kong listco’s 2022 annual report shows.
Pricing talks are still in a preliminary stage, but the interest rate may be 8% to 10%, the first and third source said.
Swapped into USD floating rate, the 8-10% fixed rate loan would equate to SOFR + 454bps- 650bps, according to a banker not involved in the situation.
Vinda’s debt totaled HKD 3.89bn (USD 497m) as of end December against cash and equivalents of HKD 607m (USD 77.55m), its 2022 financials show, implying an enterprise value of about USD 3.67bn, based on the current market cap.
The company generated HKD 2.1bn EBITDA in 2022, down 36% YoY, as per the annual report. It is estimated to generate EBITDA of HKD 2.7bn in 2023, according to the first and third source.
In April, Essity announced a strategic review of its ownership of Vinda and its Consumer Tissue Private Label Europe business, saying that this could result in divestments, though no decisions had been made on that at the time. Essity is a unit of Sweden-headquartered forestry company SCA.
Following media reports stating that Li was interested in acquiring Essity’s stake, Vinda announced on 14 May that it has not received any update on Essity’s strategic review.
Vinda mainly engages in production and sale of personal hygiene products, with factory operations in China and Malaysia. It also has sales office in Australia and the United States.
Vinda did not respond to requests for comment. No contact details could be found for Chairman Li in the public domain.