Private Equity News & Analysis

Permira, TPG and KKR join up with CDB

A powerhouse pact between the three PE firms and state-owned China Development Bank is likely to accelerate the flow of capital in and out of China.

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Private equity firms Permira, TPG Capital and Kohlberg Kravis Roberts have each signed partnership agreements with CDB Capital in a link-up that provides them with advantageous access to opportunities in China.

The agreements were announced in a statement released by China Development Bank.

CDB Capital, the wholly-owned investment subsidiary of the Chinese bank, has been a key player providing financing for domestic corporations to go abroad for M&A, something the Chinese government has encouraged. The partnerships highlight its ambition to become an internationally competitive institution. CDB intends to “not only help Chinese companies make good [cross-border] acquisitions but manage the acquisitions afterwards”, an industry source told PEI sister title PE Asia.

The private equity firms in turn can use the powerful connections provided by the CDB partnership to pursue prime opportunities in China.

“Our cooperation agreement will provide the Permira funds with excellent access to investment opportunities in China,” Kurt Björklund, co-managing partner of Permira, said in a separate statement.

However, there is a distinction between the three separate agreements, another source told PE Asia. The memorandums of understanding CDB signed separately with TPG and Permira are “strategic partnership” agreements, which “opens itself to a lot of possibilities”, the source said. By comparison, the pact CDB signed with KKR is a “co-investment agreement”. The source declined to provide further details.

Both Permira and KKR declined to comment beyond the statements, while TPG could not be reached by press time. CDB owns a minority stake in TPG.

Established in August 2009, CDB Capital has also been stepping up its investment in domestic private equity funds. Late last year, CDB alongside Suzhou Ventures Group launched China’s largest domestic fund of funds, Guochuang, which has a total target size of RMB60 billion. While Suzhou Ventures Group is making investments in Chinese venture capital funds, CDB Capital is in charge of private equity fund investment.