WL Ross & Co. LLC ("WLR"), Hwabao Investment Corp., the investment arm of China Baowu Steel Group, ("Baowu"), U.S.-China Green Fund and China Merchants Finance Holdings Co., Ltd. today announced that they have signed a framework agreement to form a joint venture for the purpose of establishing an investment vehicle to acquire steel industry assets in China. The venture brings together the complementary backgrounds and experience of each of the partners to focus on the development of a long term plan to enhance the commercial and environmental viability of the Chinese steel industry.
The framework agreement sets forth the terms upon which the parties have agreed to jointly establish Four Rivers Investment Management Company (the "JV"). The JV is expected to establish an investment vehicle dedicated to the domestic Chinese steel production sector. Through the investment vehicle, the JV expects to make investments totaling RMB40 billion to RMB80 billion.
WLR and Baowu will lead the shareholder group to establish the investment vehicle as well as to identify and invest in underperforming steel industry assets. The goal is to restructure distressed balance sheets and create operational efficiencies through process improvements and capacity rationalizations. Members of WLR, Baowu and senior management of the JV will comprise the investment committee. Each shareholder will have representation on the board of directors.
"With roughly 50% of global capacity, China clearly represents the fulcrum of the steel making industry," said Stephen Toy, Senior Managing Director & Co-Head of WLR. "By establishing this vehicle with world-class partners anchored by one of the world's largest and most advanced steel companies, we believe we will be well positioned to create long-term value through a transformational investment approach."
"We are excited to partner with such world-class institutions to address the significant overcapacity in the Chinese steel industry," said Zhuping Zhou, Chairman of Hwabao. "Our lead partner's steel industry experience and investment success with International Steel Group will be instrumental in creating a long term viable industry within China."
The JV will be headquartered in Shanghai, China. Once established, Mr. Zhuping Zhou will become CEO, and Dr. Weihua Ma, previously CEO and President of China Merchants Bank Co., Ltd., will serve as Chairman of the JV.
About WL Ross & Co. LLC
WL Ross & Co. LLC is a New York based private equity firm. During its approximately 20 years of history, the firm has completed turnaround investments in industries ranging from steel and other materials, coal, automotive parts, banking and financial services, shipping, and energy. WL Ross & Co. has been a subsidiary of Invesco since 2006.
About Hwabao Investment Corp.
Hwabao Investment Corp. is a wholly owned subsidiary of China Baowu Steel Group Co., Ltd., and dedicated to investments and relevant consultation services in metallurgical and other related industries.
About U.S.-China Green Fund
U.S.-China Green Fund was jointly initiated by The Office of The Central Leading Group for Financial Economic Affairs in China and the Paulson Institute in the U.S. with a mission to promote sustainable green development in China through innovative U.S.-China cross-border collaboration.
About China Merchants Finance Holdings Co., Ltd.
China Merchants Finance Holdings Co., Ltd. is a subsidiary of China Merchants Group and principally engaged in the financial service business and related investments.