American Dairy has struck a deal with Sequoia Capital to raise US$63m through the placement of 2.1m shares with the investment firm.
The Chinese infant formula maker said that the purchase price includes $47m in cash and the conversion of a $16m bridge loan. The transaction is expected to close by the end of this month.
Under the terms of the agreement, the company will issue additional shares to Sequoia Capital if certain 2009 and 2010 earnings targets are not met, and Sequoia Capital may require a repurchase of its shares in certain circumstances.
Sequoia will also take a seat on the company’s board of directors.
“We are pleased to enter into a financial partnership with Sequoia Capital, a renowned private investment firm known for assisting high-growth companies. We are also pleased to have Sequoia Capital’s representative join our board of directors,” said Leng You-Bin, the chairman and CEO of American Dairy.
“This transaction will allow us to increase our growth capital to fund our long-term strategic plan to achieve leadership position within our industry.”
Last month, American Dairy said it sees full-year 2009 revenues reaching $330-$360m, representing an annual growth rate of around 80% from 2008.