Prax Capital funds Chinese hotel chain

The firm has invested $10m to back the expansion plans of Blue Horizon Group as it looks to tap into growing demand in the hospitality sector in China.

Prax Capital, a China-focussed private equity fund manager, has invested $10 million (€6.5 million) in Blue Horizon Group, a hotel chain in Shandong province of China for an undisclosed stake.

Jeff Yao, managing partner at Prax Capital, said in a statement: “The retail chain model within consumer services is a key sector for Prax.”

Established in 1994, Blue Horizon Group manages 12 hotels and two restaurants in China and it targets mid to high-end customers. It has an in-house vocational school for training staff for its expanding hotel operations.

Prax said in a statement that the travel and entertainment sectors in China have witnessed rapid growth as a result of rising disposable incomes in the country. There is a high demand in the hospitality market owing to an increasing number of tourists and business travelers.

Chunliang Zhang, chairman of Blue Horizon, said that the company “plans to become a top 10 domestic hotel operator in mid- to high-end segment by 2012 and a top five operator within 10 years.” He added that Prax will have an active role in the management of the business and it is already involved in the company’s strategic plans.

The investment will be made out of Prax Capital Fund II, a $150 million fund that makes growth capital investments in the range of $10 million to $25 million in China’s industrial manufacturing, consumer services and clean tech sectors.

The firm’s past deals include an investment in Kelti (China), a skincare salon chain; and a 2006 co-investment with global private equity firm 3i in Little Sheep, a restaurant chain.

Little Sheep made its debut on the Hong Kong stock exchange earlier today following an IPO through which it raised $100 million, with the two private equity firms continuing to maintain an interest in the company following the issuance of shares to the public.

Prax has offices in Hong Kong, Shanghai and Miami.