China’s Gome Electrical Appliances will raise at least $417 million through an investment from US private equity firm Bain Capital and a share sell, a move that could help shore up the retail electronics giant scandalized by a corruption probe.
Under the deal, Bain will buy $233 million in bonds that can be converted into an equity stake of 12.8 per cent in Gome, the country’s largest consumer appliance retailer, the company said in a statement on Monday.
The initial conversion price would be $1.18 Hong Kong dollars per share, about 5.4 per cent over the company’s stock price before it was suspended Nov 24.
Gome will also offer new shares, to be underwritten by Bain, at a 60 per cent discount to the share’s last price.
In all, the deal is expected to net Gome at least $417 million in fresh capital and give Bain an equity stake between roughly 10 per cent and 24 per cent.
Bain’s investment would afford it three seats on Gome’s board of directors. The board now has 11 directors.
The move is seen as a way to help tide the company over amid the global economic crisis and a corruption probe centered on its founder and wealthy ex-chairman, Wong Kwong-yu, that has also ensnared several government officials.
Wong has been detained since last fall. Gome’s CEO, Chen Xiao, replaced Wong as chairman.
Gome said an audit confirmed the “sound foundation” of its internal controls and corporate governance.