The Tanti group has routed its investment through a Singapore-based special purpose vehicle, Colossus Holdings, which will own 26% of the JV. Of the remaining 64% will be owned by Arcapita and 10% will continue to be owned by Honiton's existing shareholders.
Honiton is an alternative energy provider with the rights to five properties in ChinaÆs Inner Mongolia region. In aggregate, Honiton has the potential to develop up to 1,650MW of wind power capacity, although currently it has only 50MW in operation and another 100MW under development. Honiton was founded by Gordon Crawford, founder of London Bridge software, and Robert Adair, the chairman of oil explorer Melrose Resources, who are both non-executive directors of the firm along with Paul Eveleigh who is CEO. On its website, Honiton describes itself as a 100% non-Chinese owned business that is largely managed by Chinese managers based in China.
Arcapita's and Tanti's total outlay for the acquisition and the development of the wind farms is $2 billion. The parties did not disclose the split between how much has been paid for Honiton and how much will be invested over the next four to five years on capital expenditure.
ôHonitonÆs existing management team will be retained,ö an Arcapita representative clarified to FinanceAsia, adding that the company will be managed by a five-strong board with two management members, two Arcapita nominees and one Colossus nominee. The Arcapita representative added that the firm aims to exit the investment once the assets have stabilised, around or just after 2012, via a trade sale or an initial public offering.
Arcapita Bank is an Islamic investment firm started in 1997. It has an equity base of $1.1 billion and its principal lines of business are corporate investment, real estate, asset-based investment and venture capital. It opened a Singapore office earlier this year to enhance focus on investment opportunities in Asia.
The investment in Honiton follows just days after ArcapitaÆs first Singapore investment, which is a joint venture with Singapore-based real estate firm Mapletree Investments to set up a real estate fund that will hold $1.3 billion of high-rise ready-built industrial properties in Singapore. Arcapita has now completed seven investments in Asia with a total transaction value of more than $5 billion.
The Honiton deal brings together the financial muscle of Arcapita and TantiÆs background and expertise in wind power. Tulsi Tanti is the founder and controlling shareholder of Suzlon Energy, the worldÆs fifth largest wind turbine supplier in 2007. As of May 2008, Suzlon had orders on hand for 3,454MW of turbines. In the most recent fiscal year to March 2008, Suzlon had revenues of $2.8 billion on which it earned a net profit of $291 million.
Suzlon has transformed itself from a domestic company into a global player over the past few years. In 2006 it acquired Hansen Transmissions, a Belgian wind energy and industrial gearbox manufacturer, for $565 million. Then in May 2007 it won a bidding war to buy Germany's REPower for Ç1.2 billion ($1.88 billion). Suzlon is now headquartered in Denmark.
ôThis investment reinforces our commitment towards the renewable energy sector and our belief in the exponential growth potential of wind energy in developing markets such as China and India,ö Tanti says of the Honiton transaction in a written statement. Yes Bank, which also advised Suzlon on its acquisitions of Hansen and REPower, was financial adviser to Colossus on the deal.
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