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Kasen's Hong Kong IPO raises $64.5M for growth

By Thomas Russell -- Furniture Today, January 1, 2006

Hong Kong — Kasen International Holdings, an upholstery maker with over 13.9 million square feet of production space in and near Zhejiang Province, raised about HK$500 million, or US$64.5 million, in an October initial public stock offering here.

The company, which said it sells upholstery to Bernhardt, Furniture Brands International, Berkline/BenchCraft, La-Z-Boy, Rooms To Go and others, will use half the amount raised to repay loans, 40% for expansion and the balance for working capital and other business needs.

The United States represents most of its business, but Kasen hopes to grow in other markets.

"By capitalizing on our competitive cost structure, vertical integration, large-scale operations and in-depth technology know-how, we aim to further expand in Australia and Japan and into Europe so that we can become one of the world's leading manufacturers of upholstered furniture products, furniture leather and automotive leather," a company prospectus said.

The prospectus indicated Kasen would expand its 7.9 million-square-foot Higher Point Sofa Industrial Park in Zhejiang.

Kasen produces leather and fabric upholstery, automotive leather and leather garments. Fabric and leather upholstery accounted for 71.3% of total revenues in 2004, up from 52.9% in 2003.

Leather upholstery represented the bulk of its business at 46% of its estimated US$353 million in 2004 sales. That was up from 33.6% of US$264.3 million in sales in 2003. Leather and fabric furniture covers were 22.5% and 6.3% of sales, respectively, in 2004. Fabric upholstery represented 4.1% of 2004 revenues.

One of Kasen's leather upholstery customers is Broyhill. Commenting on the IPO, President and CEO Harvey Dondero said, "I don't think it changes the relationship at all. If anything, it gives them more capital to expand their manufacturing base, which I see as a positive."

Dondero didn't say how much business Broyhill does with Kasen, but said it was pleased with Kasen's product quality.

Kasen recently acquired a majority stake in Hainix, a company that produces leather for Pennsylvania House and Kincaid, two La-Z-Boy subsidiaries. Mike Padjen, vice president of operations for La-Z-Boy Global, said, "We have seen some real positives out of that purchase," adding the now-public status of Kasen will help La-Z-Boy understand its pricing and profitability.

The IPO is the second for a major Chinese furniture maker in recent months. In early November, Samson Holding, parent of case goods manufacturer Lacquer Craft, raised about US$245 million in a stock offering in Hong Kong.

Analysts have noted that going public could increase price pressures from customers, but Broyhill's Dondero said, "We're always putting pricing pressure on them."

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Kasen’s Hong Kong IPO raises $64.5M for growth

Jan 3, 2006

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