KKR Is Said to Sell Oldest Asian Investment for $645 Million

(Bloomberg) -- KKR & Co. agreed to sell Singapore hard-drive component maker MMI Holdings Ltd. for about $645 million including debt, people with knowledge of the matter said, exiting the oldest Asian investment listed in its portfolio.

KKR signed a deal to sell MMI, which it has owned for 11 years, to a Chinese buyout group led by an affiliate of Beijing HBH Innovation Industry Fund, according to the people. Cybernaut Investment Group, a private equity firm started by WebEx Communications Inc. co-founder Min Zhu, is also part of the consortium, the people said, asking not to be identified because the information is private.

The buyout firm will generate a return of about 1.6 times its initial investment in MMI, including the dividends it collected during the holding period, one of the people said. The Chinese investor group is purchasing MMI’s holding company for about $245 million in equity and will assume around $400 million of debt, the people said.

Any transaction would add to the $38.3 billion of announced Chinese acquisitions in Singapore over the past three years, according to data compiled by Bloomberg. KKR is selling the business as increasing use of mobile devices decreases demand for traditional storage solutions.

Holding Period

Members of MMI’s management team plan to reinvest in the company together with the Chinese consortium, according to one of the people. KKR expects to complete the sale in one to two months after receiving some pending regulatory approvals, the people said.

A representative for KKR declined to comment. Representatives for MMI, Beijing HBH and Cybernaut didn’t immediately respond to requests for comment.

Private equity firms typically aim to exit their investments after three to five years. KKR bought MMI in a 2007 deal valuing the company at about $650 million, the Bloomberg-compiled data show. It had planned to relist MMI on the Singapore stock exchange in 2015, before deciding to postpone the offering amid market volatility, people familiar with the matter said at the time. 

MMI makes and ships more than 26 million high-precision parts for computer hard disk drives weekly, its website showed earlier this year. The company has design centers and manufacturing facilities in China, Malaysia, Singapore and Thailand, according to the website, which has since been taken down and now shows an “Under Construction” notice.

Goodpack, Mandala

New York-based KKR contributed about $250 million of equity to the initial purchase of MMI, a person with knowledge of the matter said in February. It has received about $150 million in dividends from MMI over the past three to four years, the person said at the time.

Other Singapore companies in KKR’s portfolio include Goodpack Ltd., a provider of bulk containers it acquired for S$1.4 billion ($1 billion) in 2014, and Mandala Energy Ltd., a Southeast Asia-focused oil and gas exploration and production firm founded in 2015. KKR sold Singapore-based Unisteel Technology International Ltd., which makes precision-engineered components, to SFS Group AG in 2012.

MMI’s newfound owners are already working to make the business publicly traded. Shenzhen-listed Letong Chemical Co. said last week it plans to acquire MMI’s holding company for 2.4 billion yuan ($349 million) in cash and stock.

Letong Chemical will buy the company from an investment vehicle called Wuhan Zhongke Xinwei, which is in the process of acquiring MMI, according to an exchange filing. Letong Chemical is suspended from trading while appraisal work for the proposed deal is ongoing.

Net income at MMI’s holding company more than tripled last year to $41.4 million, while revenue was little changed at $500.6 million, Letong Chemical said in the statement.

©2018 Bloomberg L.P.