July 23, 2018 / 10:18 AM / 5 months ago

UPDATE 1-KKR-led consortium to buy Taiwanese chemicals firm LCY for $1.56 bln

(Adds context, KKR quote, LCY stock close)

By Kane Wu

HONG KONG, July 23 (Reuters) - A consortium led by KKR & Co agreed to acquire Taipei-listed LCY Chemical Corp in a $1.56 billion stock deal, the companies said on Sunday, marking it the U.S. private equity firm's first deal in the island in more than a decade.

The investment is also the largest private equity-backed transaction in the island, according to Thomson Reuters data.

KKR, leading a group of investors including LCY's employees and family members of its founders, will pay T$56 ($1.83) per share, representing a 17.3 percent premium to LCY's closing price on July 20.

Upon completion, KKR will hold a majority and controlling interest in LCY.

KKR invested in Taiwanese electronics component maker Yageo Corp in 2007 and made a buyout offer for the company four years later, which was rejected by Taiwanese regulators.

Private equity dealmaking in Taiwan peaked in 2006 when a consortium led by South Korean firm MBK Partners acquired China Network Systems Co but has since 2008 declined, with a few deals proposed by global firms blocked by local regulators.

"We see companies - hidden champions, companies that are not well known but have really established competitive positions with their product," said Paul Yang, KKR's head of Greater China, about seeking opportunities in Taiwan.

Valuation in Taiwan is less challenging compared to some of the other markets in Asia, he said.

The private equity powerhouse will make the investment from its $9.3 billion Asian Fund III, raised in June 2016 and currently the biggest private equity fund for the region.

Founded in 1965, LCY produces specialty chemicals with a concentration on thermoplastic elastomers and performance plastics used in a wide range of products.

LCY's board has approved the deal and the chemicals maker will be delisted after the completion of the transaction, according to a statement.

The transaction, which is expected to close in the fourth quarter, is subject to approval from LCY's shareholders and regulators in Taiwan and China, people familiar with the deal said.

Goldman Sachs (Asia) is KKR's financial adviser, while Goldman Sachs Bank USA has agreed to underwrite and arrange debt financing to the consortium for the deal, the companies said.

LCY Chemical shares hit the ceiling and closed up 9.95 percent at T$52.50 on Monday. ($1 = 30.6290 Taiwan dollars) (Reporting by Kane Wu; Editing by Gopakumar Warrier)

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