Shanghai, China, May 11, 2006—The Carlyle Group is investing $27.5 million to buy new shares in Shanghai Anxin Flooring Co Ltd, China's largest manufacturer and distributor of solid wood flooring, the investment fund said.
In a statement Carlyle said its initial investment will be $20 million and the remainder will be funded in the next two years. Carlyle officials could not immediately be contacted for further details on the size of its shareholding.
The Chinese company in the same statement, without providing details, said it would seek to raise further capital for expansion through an overseas listing.
'In the long run, we will seek an overseas listing to tap global capital markets for future funding needs of Anxin's international expansion.' Anxin founder and chief executive Lu Wei-Guang said in the statement.
Carlyle's investment will support Anxin's launch of a new brand of engineered and solid wood flooring products from Russia, Southeast Asia and Africa and will be marketed in China, Carlyle said.
The new brand will have an independent distribution network from the existing flagship 'Anxin' brand, which features primarily solid wood flooring products and selected engineered wood flooring products made of high-end wood from Brazil.
Engineered wood floors are less expensive and more environmentally friendly than the high-end solid wood floors usually made of rare hardwood from trees of more than 60 years old, Carlyle said.
'Overall demand for wood floors will remain strong, driven by robust real estate development throughout China and increasing consumer spending,' Lu said
In the statement Lu said the company earlier invested more than 80 mln yuan in two production lines with a capacity of 2 mln square meters of engineered wood flooring and it will add three production lines next year through another commitment of 200 mln yuan.
Wayne Tsou, managing director of Carlyle Asia Growth Capital Group said the engineered wood floor market is fast growing and is expected to surpass the market size of solid wood floor in China in five years.
The China wood floor market was about 230 mln square meters in volume in 2005, up from 2004's 130 mln with a 21 percent compound annual growth rate over the past five years. Anxin generated revenue of 700 mln yuan from solid wood floors in 2005, the statement said.
In 2004, Anxin acquired a large natural forest in Brazil to secure long-term timber resources amid a global supply shortage, becoming the first Chinese company to own forestry resources abroad. It now accounts for more than 50 pct of Brazil's timber exports to China for use in wood flooring, the statement said.
Last August, Anxin acquired 40,000 square meters of land on the Sino-Russian border in Heilongjiang Province of northeastern China to build a wood processing plant with an investment of 100 mln yuan. The plant is scheduled to start operation in 2007 and will be able to process 1,000 cubic meters of timber each month, the statement said.
