Cathay Capital raises €460m

The Sino-French funds has made a first close on the €500m vehicle.

Cathay Capital Private Equity has raised €460 million towards a first close on its third China-France cross-border fund, according to a statement.

The vehicle, which has a target of €500 million, secured its two cornerstone investors in March, when China Development Bank and Bpifrance each committed to invest up to €100 million in the vehicle, Private Equity International reported earlier.

Cathay invests in mid-market companies in France and China, as well as the rest of Europe, taking significant minority or majority stakes. Cathay Midcap Growth Fund III will invest in more significant positions in larger companies and larger deals compared to its previous funds.

“This midcap fund launch will consolidate our existing partnership with Bpifrance and Cathay Capital. It heralds a significant new phase for Franco-Chinese cooperation in the area of private equity investment, especially in midcap companies, which we feel is a particularly promising segment presenting numerous opportunities,” Haibin Fan, president of China Development Bank, said in a statement.

“In this way, Chinese companies will be able to benefit from advanced technological expertise which are well-developed in France, while, in turn, French companies will gain from increased exposure to booming Chinese consumption market, especially within certain sectors [such as] lifestyle, industry, technology.”

The firm's first private equity fund, Cathay Capital I, was launched in 2006 and raised €70 million. The fund is now fully invested, while Fund II is still being deployed, as is another side vehicle, a €150 million Sino-French fund for small- and medium-sized enterprises, also funded by CDB and Bpifrance and launched in 2012.

Cross-border funds with China have been a popular phenomenon in recent years – investors capitalising on China growth or European expertise.

However, last week Sino-European fund Mandarin Capital Partners said it would be shifting its strategy, no longer investing directly in Chinese businesses, but just expanding European companies into China.

Founder Alberto Forchielli said, “It is a much more profitable investment because [when] investing with Chinese companies in Europe, people are not willing to sell to Chinese. So the [Chinese firms] end up buying companies nobody wants or overpaying for the good companies.” He added that investing in Chinese companies is also too risky from a governance perspective.

Mandarin is expecting a €200 million second closing on its latest private equity fund before the end of August, a source close to the matter told PEI. The fund expects a final close on €500 million in the first quarter of next year.