abaxglobalcapital's  Instablog

BEIJING, June 28, 2012 -- /PRNewswire-Asia-FirstCall/ -- Fushi Copperweld, Inc. ("Fushi" or the "Company") (Nasdaq: FSIN) today announced that it has entered into an Agreement and Plan of Merger (the "Merger Agreement") with entities affiliated with its Chairman and Co-Chief Executive Officer, Mr. Li Fu, and Abax Global Capital (Hong Kong) Limited ("Abax"), at a price of $9.50 per share in cash.

Under the terms of the Merger Agreement, each share of the Company's common stock that is issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive $9.50 in cash without interest, except for shares owned by Mr. Fu, Abax Global Capital and their respective affiliates, who currently beneficially own an aggregate of approximately 29.4% of the Company's outstanding shares.

The Company's Board of Directors, acting upon the unanimous recommendation of the Special Committee of the Board of Directors, which is comprised solely of independent and disinterested directors, approved and adopted the Merger Agreement and recommends that the Company's shareholders vote to approve the Merger Agreement.

There is no financing condition to completion of the merger. Mr. Fu and Abax Global Capital have secured fully committed debt financing from China Development Bank Corporation Hong Kong Branch to finance the transaction.

Jack Perkowski, Chairman of the Special Committee, said, "The Special Committee undertook an extremely thorough and comprehensive review of the offer presented by Mr. Fu and Abax Global Capital Abax Global Capital to ensure that the interests of all Fushi shareholders not participating in the buyout proposal were best served. With the assistance of independent financial and legal advisors, we established the credibility of the offer, including the availability of committed debt financing from China Development Bank Corporation Hong Kong Branch. We unanimously determined that this transaction provides all disinterested shareholders with an immediate and substantial cash premium for their investment in Fushi."

Mr. Li Fu, Chairman and Co-Chief Executive Officer of Fushi, said, "I want to thank the Special Committee for taking the time to thoroughly review and evaluate our offer and our shareholders for their patience and understanding throughout this process. Fushi's success is driven by the ongoing efforts of our talented employees, and I am also deeply appreciative for their tireless work and dedication to our customers and Fushi's continued success."

Donald Yang, Managing Partner at Abax Global Capital , said, "We are pleased that the Special Committee has accepted our going private proposal and wish to thank each of the Special Committee's members for their diligent efforts."

The merger is subject to approval of the Merger Agreement by the Company's shareholders (including the approval of the holders of at least 60% of the outstanding Fushi shares not owned by Mr. Fu, Abax and their respective affiliates) and other customary closing conditions. The Company will schedule a special meeting of shareholders for the purpose of voting on the approval of the Merger Agreement. The transaction is currently expected to close in the fourth quarter of 2012. If completed, the merger will result in the Company becoming a privately-held company, and its common stock will no longer be listed on any public market.

BofA Merrill Lynch is serving as financial advisor to the Special Committee. Deutsche Bank is serving as financial advisor to Mr. Fu and Abax. Gibson, Dunn & Crutcher LLP is serving as legal advisor to the Special Committee. Loeb & Loeb LLP is serving as legal advisor to the Company. Skadden, Arps, Slate, Meagher & Flom is serving as legal advisor to Mr. Fu. Weil, Gotshal & Manges LLP is serving as legal advisor to Abax.

Additional Information about the Merger

In connection with the proposed merger, the Company will prepare and file with the Securities and Exchange Commission ("SEC") a proxy statement. INVESTORS ARE URGED TO READ CAREFULLY AND IN ITS ENTIRETY THE PROXY STATEMENT AND OTHER MATERIALS FILED WITH THE SEC REGARDING THE PROPOSED MERGER WHEN THEY BECOME AVAILABLE, AS THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders will be able to obtain these documents without charge, from the SEC's website . In addition, these documents can be obtained, without charge, by contacting the Company's Investor Relations department at the following address and phone number:

TYG Center Tower B, Suite 2601 Dongsanhuan Bei Lu, Bing 2 Chaoyang District Beijing, China, 100027

(+1) 615.377.4183

The Company and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the Company's shareholders with respect to the proposed merger. Information regarding the executive officers and directors of the Company is included in the Definitive Proxy Statement on Schedule 14A filed by the Company with the SEC on April 27, 2012 with respect to the 2012 Annual Meeting of Shareholders of the Company. Additional information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be, to the extent required, contained in the proxy statement to be filed with the SEC regarding the proposed merger.

About Fushi Copperweld

Fushi Copperweld, Inc., through its wholly owned subsidiaries, Fushi International (Dalian) Bimetallic Cable Co. Ltd., and Copperweld Bimetallics LLC, is the leading manufacturer and innovator of copper-clad bimetallic engineered conductor products for electrical, telecommunications, transportation, utilities and industrial applications. With extensive design and production capabilities, and a long-standing dedication to customer service, Fushi Copperweld is the preferred choice for bimetallic products worldwide.

Safe Harbor Statement

This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology such as "will" "believes", "expects" or similar expressions. All statements that address events or developments that we expect or anticipate will occur in the future - including statements relating to the expected timetable for completing the proposed transaction and the ability of the Company to obtain the approvals required to consummate the transaction - are forward-looking statements. These forward-looking statements may also include statements about our proposed discussions related to our business or growth strategy, which is subject to change. Such information is based upon expectations of our management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and upon assumptions with respect to future business decisions, which are subject to change. We do not undertake to update the forward-looking statements contained in this press release. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see our most recent Annual Report filed with the Securities and Exchange Commission (SEC) on Form 10-K, and our subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system (EDGAR) at www.sec.gov.

2012.06.30 Smart download from http://www.sacbee.com/2012/06/28/4597267/fushi-copperweld-inc-enters-into.html

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Abax Global Capital, a Morgan Stanley-backed manager of $900 million of hedge and private equity funds, plans to start a fund this year to invest in U.S.-listed Chinese companies that will be taken private.

Abax Global Capital is seeking $300 million initially for the fund, which it may start in the first half, Donald Yang, its Hong Kong-based managing partner, said in an interview yesterday. Such investments, including in Harbin Electric Inc., helped the $300 million Abax Global Capital special situations fund return 28 percent last year.

Managers like Abax Global Capital are planning funds with multi-year restrictions on redemptions to enable longer-term investments. Swings in frequently traded assets and the high correlation between different markets led to hedge funds' second-worst annual performance last year since at least 1990, according to data tracked by Chicago-based Hedge Fund Research Inc.

"It's very hard for a pure public strategy in this market," said Yang. "From a risk-reward point of view, it's going to be a very challenging market for equities, probably more downside than upside. Credits are the same story."

The HFRI Fund-Weighted Composite Index declined 5 percent last year.

The Abax Global Capital special situations fund bets on companies in Asia, especially in China, whose debt and equity prices move as a result of mergers, hostile takeovers, asset sales and large share buybacks.

It returned 21 percent in the fourth quarter, Yang said. The majority of the profits came from actual or mark-to-market
gains from deals involving U.S.-listed Chinese firms being taken private, such as the completion of the management buyouts of Harbin Electric and China Security & Surveillance Technology Inc.

U.S. Investigations

Valuations of smaller Chinese manufacturing companies traded in the U.S. plummeted after the global financial crisis. The market value of U.S.-listed Chinese companies has tumbled since November 2010 amid allegations of financial fraud by short sellers such as Muddy Waters Research.

The USX China Index, which tracks the performance of U.S.-listed companies that derive most of their revenue from China, has declined 18 percent in the last 12 months. Shares of Sino-Forest Corp., facing allegations from Muddy Waters it had exaggerated its timber assets and operated a Ponzi scheme, have lost 94 percent since the end of 2010 in U.S. over-the-countertrading.

U.S. regulatory investigations since 2010 into accounting practices of Chinese companies that gained listing on American exchanges through reverse mergers also damped share prices.

Going Private

In some of the fund's investments in the privatization of U.S.-listed Chinese companies, such as Harbin Electric, Abax Global Capital turned its public equity holdings into private equity investments, said Yang.

Abax Global Capital has held talks with Chinese private investors about the dedicated fund to invest in U.S.-listed Chinese companies being taken private, said Yang. Investors in the fund, which will be available to international investors and Chinese citizens with offshore accounts, will commit their money for at least five years, he added.

The planned fund will surpass a $50 million managed account set up last year for a small group of investors, which makes similar investments together with the Abax Global Capital special situations fund, said Yang.

Abax Global Capital 's other investments in U.S.-listed Chinese companies being taken private include Fushi Copperweld Inc.

Taking Private

Seventeen deals to take U.S.-Chinese companies private have been announced since 2009, and seven have been completed so far, according to data compiled by Bloomberg.

The shortage of bank financing amid the European debt crisis has made it difficult to arrange such deals, because the investors will have to negotiate a lower price to achieve the same expected returns without leverage, said Yang.

Private equity investors trying to strike deals without leverage may also find it hard to negotiate with chief executive
officers, who are typically majority stakeholders, Yang said. The size of the investments required to complete a privatization would probably dilute the CEO's holdings and result in the outside buyers taking majority stakes in the companies.

Real-Estate Fund

Most of the assets in the Abax Global Capital special situations fund are in privately negotiated debt and equity securities, including
fixed-income, structured loans and private equity types of investments, Yang said.

Abax Global Capital is also planning to start a fund for investments in Chinese real-estate projects in partnership with former Beijing-based Merrill Lynch & Co. real-estate fund investment professionals led by Greg Peng, Yang said. It will raise yuan capital from Chinese investors and will target returns of 25 percent to 35 percent from the investments, Yang said.

Chinese investors have committed about 1 billion yuan ($159million) to the fund, which is going through business
registration and may hold its first close by the second quarter, Yang said.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Abax Global Capital, a Morgan Stanley-backed manager of $900 million of hedge and private equity funds, is seeking to profit from Chinese companies abandoning U.S. listings for higher valuations in Hong Kong.

Abax Global Capital has invested in companies including Harbin Electric Inc. and Fushi Copperweld Inc., which are seeking delisting from the U.S. in leveraged management buyouts and may go public in Hong Kong later, Donald Yang, Abax Global Capital's Hong Kong-based managing partner, said in an interview yesterday.

Valuations of smaller Chinese manufacturing companies listed in the U.S. have plummeted after the global financial crisis, with the collapse of their traditional investor base of smaller U.S.-based hedge funds and individuals, said Yang.

U.S. regulatory investigations since last year into accounting practices of Chinese companies that gained listing on American exchanges through reverse mergers also damped share prices.

"Their traditional investor base is gone," he said. "But you can pick out quite a few companies in the space where the business fundamentals are very solid."

One hundred and twenty-nine Chinese companies listed in the U.S. trade at an average eight times their estimated 2012 earnings, against 11 times for 276 peers traded in Hong Kong because of a lack of research coverage, high concentration of shares among their major shareholders, and limited trading volume, according to data compiled by Citigroup Inc.

More than 3,200 hedge funds have been liquidated between 2008 and last year, 36 percent more than new starts, according to Chicago-based Hedge Fund Research Inc.

Reverse Mergers

The U.S. Securities and Exchange Commission last year started a probe amid concerns that some Chinese companies listed in the U.S. were doctoring their financial statements. U.S. exchanges have frozen or delisted shares of more than a dozen China-based firms since March amid the probes centered on those that have obtained listings through reverse mergers -- deals in which a closely held firm goes public by acquiring a traded one, thereby avoiding the scrutiny of an initial public offering.

Abax Global Capital is making the investments through Abax Global Capital Opportunities Fund and separate accounts for clients which together oversee $350 million using the same strategy. The fund bets on companies in Asia, especially mainland China, whose debt and equity prices will move as a result of mergers, hostile takeovers, asset sales and large share buybacks.

Attractive Returns

"I think this is going to be the focus for the next couple of years at least," Yang, 45, said. "It's a good investment thesis."

These companies provide more attractive returns than the traditional Chinese targets of private equity funds because they are larger in scale, have more established business operations and better internal controls. They are also valued cheaper and investors could recoup their money sooner, Yang said.

Abax Global Capital is focusing on companies that it has provided financing to before and is therefore familiar with, Yang said.

It expects to recoup such investments in less than two years, including the typical six-month ban on sales of pre-IPO investments after trading starts, he said. It can also sell the investments to private equity companies.

Abax Global Capital Opportunities Fund returned just more than 2 percent this year, and 20 percent in 2010, Yang said. It exited about 80 percent of pre-2008 investments with about 12 percent annual returns, either when the loans matured or when the companies paid it back before maturity after obtaining alternative sources of funding at lower rates, he said.

Fund Restructure

Abax Global Capital earlier this year restructured its special situations fund by creating two share classes, one with a two-year ban on withdrawals in exchange for fee discounts, and one that allows quarterly redemption that charges higher fees.

Investors were subject to a one-year outright ban on withdrawals and penalties for redemptions in the next two years when the fund was set up in 2007, said Yang.

The more frequent redemptions are to help attract U.S. and European investors who have been reluctant to put money into less liquid funds since the crisis while allowing Abax Global Capital to make longer-term private investments with higher returns, he said.

Chinese individuals and institutions now account for the majority of its assets, Yang said.

Abax Global Capital started a 500 million yuan ($77 million) private equity fund denominated in the Chinese currency early last year, with China Development Bank Corp. as its anchor investor.

It is also setting up a venture with the Chinese bank to manage another private equity fund that is expected to receive as much as 4 billion yuan of commitments from mostly institutional investors, Yang said. The venture, which has received government approval and is going through the registration process, may become operational in the next two months.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.