Asimco-Nanyue Joint Venture in China

25 Pages Posted: 21 Oct 2008

See all articles by Dong Li

Dong Li

Singapore University of Technology and Design (SUTD)

Wei Li

University of Virginia - Darden School of Business; Centre for Economic Policy Research (CEPR)

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Abstract

This case is written for a course on emerging markets finance. It can be used to teach valuation, merger and acquisition, and financial forecasting in an emerging market setting. Intrigued by growth opportunities in China, Jack Perkowski, a retired Wall Street investment banker, raised a venture capital fund with the backing of two large U.S. institutions in 1994 to found Asian Strategic Investment Company (ASIMCO) to explore private equity investment opportunities in China. After visiting more than 100 automotive component factories in China, Perkowski and his partners identified a few state-owned factories as potential equity joint venture partners. On top of the list was Nanyue Fuel Injection Pump Assembly Company, Ltd. (Nanyue), one of China's largest fuel injection pump manufacturers. After three months of negotiation, the two parties struck a deal under which ASIMCO and Nanyue would enter into a joint venture with ASIMCO holding the majority ownership. Should Perkowski and his partners give this joint venture agreement their final approval? And if so, how should Perkowski integrate and restructure its state-owned partner, Nanyue? More generally, should ASIMCO invest in China's automotive component industry?

Excerpt

UVA-F-1374

ASIMCO-NANYUE JOINT VENTURE IN CHINA

It was a warm July morning in 1994 in Beijing. Jack Perkowski arrived at Asian Strategic Investment Corporation (ASIMCO) headquarters at 7:20 a.m. Sitting down behind the desk in his spacious corner office on the top floor, he could see construction cranes spanning the horizon, basking in the morning sun. It was an awesome sight for many of his visiting friends from the United States. But Perkowski barely noticed it. His mind was instead preoccupied by the proposed joint venture between ASIMCO and Nanyue Fuel Injection Pump Assembly Company, Ltd. (Nanyue), one of China's largest fuel injection pump manufacturers. Compared with most of the deals that he had done in his Wall Street years, this joint venture was small, with a capitalization of only $ 15.31 million. Perkowski, however, felt that he and his venture partners had spent more time and effort conducting due diligence on this investment than he would normally do on deals dozens of times larger in the United States. Yet given the many uncertainties about the current and future economic and political conditions in China, about the market conditions for China's automotive components industry, and about the operations and staffing issues at the plant, Perkowski still wondered if he could make this joint venture work for him and for his investors. At 8 a.m., he and his two venture partners, Tim Clissold and Ai Jian, would meet to make a final decision on whether to proceed with the joint venture or to look for investment opportunities elsewhere in China. With 40 minutes to go before the meeting, Perkowski thought he could use the time to reflect on the extraordinary sequence of events that led him to become one of the largest foreign investors in China.

. . .

Keywords: Valuation Merger China Venture Forecasting ASIMCO

Suggested Citation

Li, Dong and Li, Wei, Asimco-Nanyue Joint Venture in China. Darden Case No. UVA-F-1374. Available at SSRN: https://ssrn.com/abstract=1279322

Dong Li

Singapore University of Technology and Design (SUTD) ( email )

20 Dover Drive
Singapore, 138682
Singapore

Wei Li (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
804-243-7691 (Phone)
804-243-7681 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/li.htm

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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