At the intersection of technology, finance and the Pacific Rim.

Tuesday, June 23, 2009

Bain Capital and Gome

A few weeks ago, we discussed the interest of private equity investors in Gome, one of China's largest retailers. Apparently, Bain has won the deal. The NY Times reports:

"Bain Capital, an American private investment firm, said Monday that it had agreed to invest as much as $432 million to acquire a minority stake in Gome Electrical Appliances, one of the biggest Chinese retailers.......Under the terms of the deal, Bain will invest about $233 million in a convertible bond and purchase as much as $199 million worth of new shares in the company, if those shares are not taken up by existing shareholders in what is called an open offer.

Gome shareholders have several weeks to decide whether to increase their holdings; whatever is not acquired by those shareholders is expected to be bought by Bain. After the deal, Bain will hold between 9 and 23 percent of Gome."

Question: Why invest in a convertible bond in this situation?


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