AVCJ Tim Burroughs | February 18, 2016
Ascendent Capital Partners has completed its exit from Nano Resources, a components manufacturer for high-speed trains, generating a more than 5x return.
The private equity firm acquired a 40% stake in Nano for $31.8 million during an industry downturn in 2012. Late last year, Nano agreed a reverse merger with Shenzhen-listed Guangdong Kaiping Chunhui at a valuation of RMB3.3 billion ($520 million). This has enabled Ascendent to make a full cash exit.
Nano’s difficulties in 2012 were the direct result of a collision the previous year between two trains in Zhejiang province, which claimed 40 lives. It was the first fatal high-speed rail crash in China, prompting the government to suspend construction of high-speed lines pending an investigation (it found that faulty signal systems were to blame).
Concluding that the industry downturn did not reflect the market potential, Ascendent made its investment. Following the resumption of construction tender processes in the second half of 2013, Nano’s operating income jumped 77% year-on-year in 2014, reaching RMB1.23 billion. Growth of 7.13% is expected in 2015.
Ascendent reached a first and final close on its second China fund at the hard cap of $600 million in July 2015. Nano represents the second exit from the private equity firm’s first fund – which closed at $365 million in 2012 – after pork producer WH Group.
The debut investment from Fund II is RYB Education, a leading pre-school care provider. Ascendent took out several early-stage investors to buy a significant stake in the company. It is now looking at additional roll-up acquisitions in an industry that is highly fragmented and expected to consolidate.