Enterpreneurs Team Up In New Private Equity Firm
An interesting new player may soon be coming to China’s crowded and highly fragmented private equity scene, with word that a major company has been set up by a group of leading entrepreneurs in Beijing and Shanghai. The company has a hefty 50 billion yuan in investment, equating to $8 billion. The player would be an important addition to China’s fast emerging field of major private equity firms, most of which are headed by entrepreneurial chiefs who are increasingly looking abroad for good investments.
China has plenty of money for private equity investment, much of it belonging to wealthy individuals who made their fortunes during the country’s economic boom of the last decade. But until recently, the country has lacked a field of strong, experienced private equity firms for those investors. As a result, China’s private equity sector is highly fragmented and populated by lots of smaller, poorly regulated firms that often serve as intermediaries to bring together wealthy individuals and investment projects.
That has begun to change in the last 2-3 years, with names like Fosun International (HKEx: 656), Citic Capital, HNA Group and Hony Capital emerging as major new players in the space with more seasoned, professional management. That group now looks set to get another big competitor, with word of this new investment company whose founders include some well-connected, major entrepreneurs.
Word of the new company emerged in a microblog posting by Shi Yuzhu, a well-known Shanghai entrepreneur and founder of online gaming firm Giant Interactive (NYSE: GA). (Chinese article) Shi disclosed that the privately owned company has already been established, and that he will personally invest 1 billion yuan for a 2 percent stake. That means the company’s total investment should be around 50 billion yuan.
There’s not much more detail in his post, though it includes a photo of a group of the group’s new founders. One of those founders is Dong Wenbiao, chairman of Minsheng Bank (HKEx: 1988; Shanghai: 600016), China’s first privately funded bank. The report indicates several others at Minsheng also will invest in the new company. Another partner is Lu Zhiqiang, chairman of Beijing-based China Oceanwide, one of the country’s earliest conglomerates set up back in 1985. The new company will most likely be based in Shanghai, China’s financial capital where both Minsheng and Giant are located.
This new company could draw on its big cash pile and entrepreneurial roots and connections in Shanghai, Beijing and around the world to quickly become a major player both inside China and also globally. Its home base of Shanghai is already home to one of China’s fastest-rising private equity firms Fosun, which is also controlled by another entrepreneurial billionaire Guo Guangchang.
In the last year alone, Fosun has trumped major global private equity firms to win in the bidding for stakes of a Portugal’s top insurer and French resort operating giant Club Med (Paris CU). (previous post) Fosun was also reportedly one of the finalists bidding to buy US financial publishing giant Forbes Media, though it’s been a couple of months now since the last reports on that deal.
We’ll have to wait and see some of its early investments before we can say more about the future prospects for this new company, whose tentative English name translates roughly to China Private Investment. But based on its big capital, strong government ties and entrepreneurial background, I could easily see this company quickly rise to become a major player, perhaps signing 2-3 deals in the $500 million to $1 billion range in its first year of operation.
Bottom line: A new private equity firm set to launch in Shanghai could quickly become a major player, drawing on strong connections and entrepreneurial backgrounds of its founding partners.
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