Ascendent pulls together China retail deal

The firm invested in Wumart Stores while acting as a facilitator for the retail giant’s $748m merger with C.P. Lotus, highlighting China's ongoing industry consolidation.

Hong Kong-based private equity firm Ascendent Capital has invested HK$232 million (€22 million; $30 million) for 16.6 million shares in Chinese retailer Wumart Stores, according to a Hong Kong Stock Exchange regulatory filing. 

The investment comes as Wumart prepares to merge with another Chinese retail giant C.P. Lotus in a potential HK$5.8 billion deal, according to a statement from law firm Morrison & Foerster, which advised Ascendent on the deal. 

Wumart has proposed to take a minority interest in the flagship retail business of C.P. Lotus for about HK$548 million and a further interest in the company’s operations in certain provinces in China for HK$2.34 billion. In turn, C.P. Lotus expects to buy a minority interest in Wumart for about HK$2.9 billion. 

“This transaction is part of an exciting trend toward consolidation in China’s fragmented retail grocery market. Ascendent Capital will bring its deep knowledge of the consumer retail industry in China to assist in facilitating a smooth integration process for Wumart and CP Lotus,” Jeremy Hunt, partner at Morrison & Foerster, said in the statement. 

We are seeing some regional funds who are doing a bit more of the investment banker role with respect to transactions. The funds do the investment too, but the reason they get the opportunity to do the investment is they get to play that investment banker role [and] help to bring the deal together.

Industry source

However, Ascendent’s role in the acquisition was more than just as an investor. The firm brought the two parties together acting in “an investment banker role”, a source close to the deal told Private Equity International.

“In the PE fund world we are seeing some regional funds who are doing a bit more of the investment banker role with respect to transactions. The funds do the investment too, but the reason they get the opportunity to do the investment is they get to play that investment banker role [and] help to bring the deal together,” the source explained. 

Some private equity firms will play this role, helping businesses expand into or out of the country. 

However, Ascendent’s role in the deal between the China retailers was actually initiating the merger itself, the source said. “The deal would not have happened if not for Ascendent.”

Ascendent’s team would not comment in detail about the deal at this time, but Leon Meng, managing partner at the firm, said, “We are very excited about the proposed transaction and pleased to be a partner with Wumart and C.P. Lotus in developing this combination. We believe in Wumart’s team's capabilities in leading the industry consolidation and delivering long term shareholder value.”

Hong Kong-based Ascendent Capital is a private equity firm founded by Meng, a former partner and Greater China CEO for D.E. Shaw, one of the world's largest hedge funds, and Kevin Zhang, a former Goldman Sachs partner. 

Earlier this year, the firm closed its debut fund on RMB 500 million, according to PEI's Research & Analytics division.