American Dairy To Issue 2.1 million Shares In Private Placement

New York, Wall Street Journal: American Dairy Inc. will issue 2.1 million shares via private placement to venture-capital firm Sequoia Capital for about $63 million.

The purchase price includes $47 million in cash and the conversion of a $16 million bridge loan the company – which makes and distributes infant formula, milk powder and soybean, rice and walnut products in China – got from Sequoia late last month.

The deal is expected to close Aug. 27. Under the agreement, American Dairy will issue more shares to Sequoia if certain earnings targets this year and next aren’t met.

Sequoia Capital will also nominate a representative to American Dairy’s board.

American Dairy Chairman and Chief Executive Leng You-Bin said the company was pleased to partner with Sequoia, which he called a firm “known for assisting high-growth companies.”

The company said last month its infant formula sales would more than double in the second quarter, but its full-year revenue forecast was well short of what Wall Street expected. The second-quarter gain will only be 10% above a year ago, which looks paltry compared with its first-quarter tripling of sales and quadrupling of profits.

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