EQT Takes Stake in Chinese Modern Metal

Sweden-based private equity group EQT has acquired 30 per cent of Chinese aluminium part manufacturer Modern Metal and Precision Holdings.


EQT’s equity will be provided through a new share issue. The funding will be used to expand production and establish a third Modern Metal plant in China.


Duen and CT Fung, who founded Modern Metal in 1969, will retain 70 percent ownership of the company, which had sales of $75m in the year to March 2010.


Sixty per cent of Modern Metal’s business is with the automotive industry. It also produces die-cast aluminium parts for the climate control and industrial automation markets.


“Our company is in an expansion phase. The Chinese automotive market is expected to grow rapidly in the next ten years, and we are well-positioned to benefit from this secular growth trend,” said CT Fung.


The Chinese aluminium die casting industry grew by 20 per cent annually between 2005 and 2009, and is expected to grow by about 14 per cent a year until 2015, according to EQT.


“Another important growth driver is the increased outsourcing to China by global companies, as die casting capacity in developed countries has been reduced during the economic downturn,” said Martin Mok, a partner at EQT in Hong Kong.


“In addition, aluminium continues to replace brass and steel components in automotive applications.  Modern Metal is well positioned for further growth and increased market share in the fragmented Chinese die casting market.”


EQT will make the investment through its Greater China II fund, which closed on $545m in December 2006.


 

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