KKR’s Chinese cement deal is third for $4bn Asia fund(3)

Kohlberg Kravis Roberts has invested $115 million in its first private equity transaction in China. It is the third for a $4 billion fund KKR has raised, its first Asia-dedicated investment vehicle.

Kohlberg Kravis Roberts has acquired a minority stake in Tianrui Cement for $115 million in the first deal the US buyout firm has completed in China. The equity deal is part of a $450 million transaction that represents the first yuan-denominated, syndicated loan arranged by international banks for a sponsor-led deal in China.

The deal coincided with the final close of KKR Asia, the first KKR fund dedicated to the region, on a hard cap of $4 billion, investors in the fund told PEO.

Washington State Investment Board, a big investor in KKR funds, has made the largest commitment of $400 million toward the fund that has made three investments to date in MMI Holdings of Singapore, Taiwan’s Yageo and most recently, Tianrui in China.

Founded in 1993, Tianrui, the largest cement producer in Henan province, was named one of twelve national level cement producers in the 2006 by the central government, requiring the support of banks and local governments.

KKR’s investment in Tianrui was supported with a $335 million loan from an international banking syndicate led by JP Morgan, as well as the International Finance Corporation. The main bulk of the long-term loan is yuan-denominated.

David Liu, a KKR partner in Hong Kong said Tianrui’s “strengths and competitive advantages in its target markets” prompted a deal.

KKR appears to have adopted a more flexible investment strategy in China allowing it to take minority stakes, where it usually prefers control positions.

In a statement, KKR said the proceeds from its equity investment and the bank financing will “primarily be used to support the Company’s growth and capacity expansion.”