Hong Kong's ZZ Capital buys U.S. index provider Alerian

Kingwisoft Technology Co

14/07/2017 15:19

By Elzio Barreto 
    HONG KONG, July 14 (Reuters) - Hong Kong investment firm ZZ 
Capital International  8295.HK  agreed on Friday to buy U.S. 
index provider Alerian in a deal valued at up to $812 million, 
gaining a foothold in the growing market for U.S. energy 
industry investment products. 
    ZZ Capital, which is listed on the Growth Enterprise Market 
of the Hong Kong stock exchange, is making an initial payment of 
$582 million, with up to $230 million more if Alerian meets 
certain revenue targets for the years ending 2018-2021, the 
company said in a securities filing.  
    ZZ Capital shares have fallen 26 percent since the start of 
the year, giving it a market capitalisation of $218.3 million. 
    The company plans to raise $286 million with the issue of 
new shares in a rights offering to make the initial payment, 
with an undisclosed amount also from debt financing and from 
internal cash. It also plans to raise another $230 million with 
a second rights offering to meet its future commitments based on 
Alerian's performance. 
    The Listing Committee of the Hong Kong exchange viewed the 
deal as "an extreme very substantial acquisition" and requested 
additional information similar to that required of companies 
going public, ZZ Capital said in the filing. 
    ZZ Capital HAS hired Haitong International Capital as 
financial adviser to conduct due diligence of Alerian. 
    Dallas-based Alerian is controlled by billionaire brothers 
Gabriel and Daniel Hammond, who will earn $485 million in cash 
for their combined 85 percent stake. Alerian's Chief Executive 
Kenny Feng, who owns the remainder 15 percent of the company, 
will earn $21 million in cash and $64 million in units of the 
special purpose vehicle ZZ Capital set up to buy Alerian. 
    The company has built a niche in the energy industry by 
providing an index that tracks so-called master limited 
partnerships (MLPs), which build the pipelines and storage tanks 
and are a common corporate structure in the oil and gas 
infrastructure sector. 
    There are about $17 billion of assets linked to Alerian  
indices, including the Alerian MLP index  .AMZ . Alerian posted 
$58.6 million in profit in 2016, down 4.3 percent from 2015, ZZ 
Capital said. 
 
 (Reporting by Elzio Barreto, editing by David Evans) 
 ((elzio.barreto@thomsonreuters.com;)(852)(2843-1608; Reuters 
Messaging: elzio.barreto.thomsonreuters.com@reuters.net)) 
 
Keywords: ALERIAN MLP M&A/ZZ CAP INTL