Arsenal opens Shanghai office

Arsenal Capital Partners is the latest private equity shop to open an Asian office. It is the firm’s first office abroad.

New York middle market firm Arsenal Capital Partners has opened its first international office in Shanghai, in order to mine local resources to support its portfolio companies. The firm has hired former Arch Chemicals executive Steve Li to lead the office.

“Through many China-based subsidiaries and joint ventures in our existing portfolio companies, Arsenal has gained considerable experience in the region in establishing lower cost manufacturing facilities, procuring manufacturing inputs, and increasing access to new markets,” managing director Jeffrey Kovach said in a statement. “By leveraging that experience and broadening our resources with a local presence in China, we will further assist our portfolio companies in capitalising on the ongoing globalisation of economies and the increasing importance of China and Asia.”

Li will be a principal at Arsenal, charged with coordinating the firm’s regional network. He spent seven years at Arch Chemicals, most recently as area director for the Asia Pacific region and president of Arch China. He has also held research and development positions in the US at adhesive manufacturers Bostik and Century International Adhesives & Coatings. He received his PhD in chemistry from Vanderbilt University, as well as an MBA from the University of Louisville’s Singapore program.

“Arsenal undertook an extensive search to identify a professional who understands the business landscape of China and Steve has a rare combination of technical expertise, local relationships and excellent general management skills,” Kovach said.

Investments in the chemicals sector comprise a large portion of Arsenal’s portfolio. Arsenal bought Velsicol Chemical and coatings maker Sermatech in 2005 for an undisclosed amount

Arsenal also acquired Reilly Industries in October 2005 for $250 million, and Rutherford Chemicals in 2003 for $65 million. In 2006 Arsenal merged the two to form Vertellus Specialties, which the firm sold in December 2007 to Chicago-based private equity firm Wind Point Partners, earning a three times return on its original investment.

Firms all over the globe have been opening Chinese office with increasing frequency. Many of them are opting to set up shop on the mainland, rather the region’s historic finance hub, Hong Kong. Nokia spin-out BlueRun Ventures opened its second office in the country, in Beijing, in December. In November, Dubai investment group Istithmar opened its first office outside of the United Arab Emirates in Shanghai. And Swiss fund of funds Adveq opened its first Asia office in Beijing in October.