CDB eyes TPG stake

The $770bn China Development Bank is following in the footsteps of GIC and KIA with the purchase of a stake in TPG's management company.

China Development Bank is mulling the purchase of a minority stake in TPG, sources close to the situation confirmed to PEI.

TPG declined to comment, and CDB could not immediately be reached.

It was unclear at press time whether a deal with CDB would be in addition to or part of a recently revealed transaction that would include a 4.5 percent stake in TPG's management company being sold to the Government of Singapore Investment Corporation (GIC) and Kuwait Investment Authority (KIA). Details as to what CDB planned to purchase and for how much could not be determined at press time.

While the transaction in April marked GIC’s second acquisition of a stake in a Western private equity firm, CDB’s purchase in TPG could also potentially benefit China’s Social Security Fund. At the end of last month, the Chinese pension fund announced a RMB10 billion investment in CDB for a 2.19 percent stake.

“Fund management business itself is an attractive business,” a fund of funds manager told PE Asia in a recent interview. “There’s a fee stream that’s quite attractive, and there’s also the carry stream that’s quite attractive. So [a private equity firm] as a standalone business is interesting.”

Other sovereign wealth funds that have bought directly into a private equity firm include China’s CIC, which owns stakes in London-headquartered Apax Partners and the publicly listed Blackstone Group; Abu Dhabi Investment Authority, which acquired a reported 9 percent stake in Apollo Global Management in 2007; and Abu Dhabi Government fund Mubadala, which bought a 7.5 percent interest for $1.35 billion in The Carlyle Group, also in 2007.

“The TPG franchise is an attractive business and [the investors] probably would be able to make money on it when it does IPO and exit,” the FoF manager said. TPG has previously indicated it had no immediate plans to go public, however.