Morgan Stanley Private Equity Asia cements Taiwan deal

Morgan Stanley Private Equity Asia makes first investment in Taiwan spending around NT$2.05 billion ($64 million) to acquire 19.9% stake in the country's leading engineering, procurement and construction company.
A shaky Taiwan stock market over the course of the last few trading sessions was perhaps a blessing in disguise for Morgan Stanley which announced on May 25 that it had acquired 19.9% stake in CTCI Corporation, TaiwanÆs leading engineering, procurement and construction firm. CTCI is a publicly quoted company and Morgan Stanley acquired the shares in several trading sessions on the floor of the exchange. The firm did not disclose the consideration.

Morgan Stanley acquired 117.256 million shares. CTCI opened todayÆs trading on the Taiwan Stock Exchange at NT$16.80 and went up to NT$17.55 during the course of the dayÆs trading. It has traded in the range of NT$17-18 over the course of the last few days. We have assumed an average price of NT$17.50 as a means to determine an indicative amount Morgan Stanley would have spent for the 19.9% stake. This price suggests Morgan Stanley spent around NT$2.05 billion ($64 million) to consummate its first investment in Taiwan.

As per its latest stock exchange filing CTCI has 598.2 million shares outstanding. Of this 210 million representing 35% are closely held. Post the acquisition by Morgan Stanley, the companyÆs free float will be reduced to about 45%.

On the occasion Chin Chou, MD and Head of Morgan Stanley Private Equity Asia said, ôWe are very pleased to have the opportunity to invest in CTCI. The company has a very proud and excellent heritage and has developed an enviable track record, in both Taiwan where it is clearly the national leader, as well as international markets.ö John Yu, Chairman, CTCI, said ôwith MSPEA as our shareholder we will be able to utilise their global expertise and franchise to create real value for the company and our shareholders. This is particularly relevant today, as the prospects for our industry are very favourable throughout Asia and the Middle East.ö

CTCIÆs principal activities are designing, surveying, constructing and inspecting various engineering projects, plants, machinery, equipment and environmental protection services. It provides topping, vacuum distillation, construction of tunnels, highways, blast furnaces, chemical storage and focuses on construction of petrochemical, power and mass rapid transit facilities. The company has a strong market position in Taiwan. Its chairman has stated a goal to be a NT$100 billion ($3.1 billion) company by 2010 and one of the top 50 in the world in engineering and construction.

Morgan Stanley Private Equity has a number of successes elsewhere in Asia to its credit and has $650 million invested in the region. In China specifically its investments include Hengan International, Bell International, Mengniu Dairy, Nanfu Battery, Paradise Retail and Ping An Insurance. This investment marks the firmÆs first foray into Taiwan.

In a research report dated May 18, 2006 Macquarie Research changed its recommendation on CTCI from neutral to outperform - with a price target above NT$18 target price. In the same report Macquarie had commented on speculation in Bloomberg and elsewhere that Abu Dhabi Investment Authority was interested in buying a stake in CTCI through an acquisition of part of its parent, CTCI FoundationÆs 35% shareholding.
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