A factory for industrial gases Photo: VCG

Private equity firm PAG has held informal talks with a few suitors interested in AirPower Technologies, China's largest independent producer of industrial gases, three people familiar with the situation told Reuters.

Potential buyers include Macquarie Infrastructure and Real Assets (MIRA), one of the world's largest infrastructure investors, they said, adding there was no certainty that the talks would result in a sale.

Hong Kong-based PAG, which has also been exploring a Hong Kong IPO for AirPower, has been targeting a $10 billion valuation for the company in that process, said two sources.

AirPower was formed after PAG merged Yingde Gases with Shanghai Baosteel Gases Group this year. 

PAG bought a 42 percent stake in Yingde Gases, China's largest independent producer of industrial gases, in 2017 from its three co-founders for some $616 million, and later took it private. 

In 2018, it won an auction for a 51-percent stake in Baosteel Gases from state-owned Baowu Steel, and it later increased its holding to 65 percent, according to AirPower's IPO filing.

AirPower filed for a Hong Kong IPO in August with the goal of raising about $1 billion, sources said, but added that it has yet to decide if it will launch the offering this year.

IPO more viable

The IPO option appears more viable than a sale as no obvious buyer has emerged at this point for 100 percent of the business, said one of the sources.

A sale, however, could give PAG a full exit, compared with a gradual selldown that would normally come with an IPO and follow-on share sales, said two sources, adding there were also concerns about volatility in the Hong Kong stock market weighing on IPO valuations.

The sources declined to be identified as the information was confidential.

PAG said the information obtained by Reuters was not accurate but did not elaborate further. MIRA and a representative for AirPower declined to comment.

A PAG exit from AirPower, either via an IPO or a sale, would mark the firm's biggest cashing-out so far. Led by veteran Chinese dealmaker Shan Weijian, PAG is aiming to raise $9 billion for what would be its largest buyout fund. 

In October, people with knowledge of the matter said that PAG aimed to raise $9 billion in what would be its fourth and largest buyout fund, adding to the region's abundant investment dry powder.

It has kicked off fundraising and a first close of the fund is expected by mid-2022, the people said, declining to be identified as the information was confidential.

Roughly two-thirds of its PE portfolio is in China, and the new fundraising underscores robust investment interest in the country despite an unprecedented regulatory crackdown on a range of sectors from technology to real estate to private tutoring.