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Hony lands RE debut in China

Hony's John Zhao continues a diversification into other asset classes.

China-focused private equity firm Hony Capital has received approval from the PRC's Ministry of Commerce to acquire a 10 percent stake in Shanghai Chengtou Corporation, according to a statement from the target company.

The approval comes about one year after Chengtou announced its intention to sell a 10 percent stake to strategic investors, then revealed in April it would sell the stake to Hony in a RMB 1.8 billion (€218 million; $295 million) transaction.

The deal marks Hony’s first in real estate and underscores its intention to diversify into new asset classes.

The firm also closed its debut mezzanine fund in September last year, an RMB 1 billion RMB (€121 million; $163 million) vehicle that was oversubscribed, John Zhao, chief executive of Hony, told Private Equity International earlier. In addition, it has begun to raise a small special situations fund in US dollars. The two funds will have synergies with each other and will provide some liquidity to SMEs in China.

The Chengtou deal is an example of the state-own enterprise reform and restructuring that has been promoted in Shanghai.

“The greater picture is that the country has evolved, so we see more significant state-owned enterprise restructuring,” Zhao said earlier.

Hony did not respond to requests for further comment on the deal.

Recently, the firm has reportedly been bidding on a buyout of UK snack maker United Biscuits. The business is owned by The Blackstone Group and PAI Partners, who acquired it in 2006 in a $2.6 billion deal, media reported earlier.