So just how important was the decision by the Chinese government to buy 9.9 percent of US alternative assets firm The Blackstone Group for $3 billion? Well, it depends who you listen to.
Pay heed to Blackstone chief Stephen Schwarzman's post-deal assessment and you'd conclude that rarely has private equity witnessed a more seminal development. In an interview with the New York Times, he hailed the agreement as an “historic change. It's a paradigm shift in global capital flows.”
Some commentators drew attention to the terms of the deal as evidence that Blackstone is, in a sense, a more powerful beast today even than the People's Republic. A slightly tongue-incheek observation, perhaps, but, after all, did the PRC government not agree to be a passive investor? In the words of the Financial Times, it took “the unusual step of giving up its voting rights”.
But there is another, somewhat more prosaic, way of looking at the same transaction. It might be reasonably argued that $3 billion is far from being a drop in the ocean – but if ever such a description could be applied to such a considerable sum, it would perhaps be with reference to China's foreign exchange reserves from whence the money has come.
Consider this: in the first quarter of 2007, these reserves grew by an average $50 billion per month. By this yardstick, a mere two day's worth of growth is accounted for by the commitment to Blackstone. In the words of one private equity professional based in Beijing, the deal in fact represents “a small hedge that allows the Chinese government to invest safely and conservatively beyond its borders.”
Two very different interpretations of the same deal. But does it really matter? Perhaps not. After all, both parties seem happy enough with the outcome.
CCMP DOUBLES UP FOR NEW FUND
almost doubling its deal capacity and targeting $3 billion (€2.2 billion), for its third fund, CCMP Asia Opportunity Fund III. The previous fund, CCMP Asia Opportunity Fund II, closed in 2005 on $1.6 billion. Founded in 1999, CCMP Capital Asia was part of JPMorgan Partners until 2005 when it underwent a rebranding. The firm has $2.7 billion under management and offices in Australia, China, Japan, Korea and Singapore. The firm recently bought Yellow Pages in New Zealand with Teachers' Private Capital for $1.54 billion. It beat KKR and CVC in the auction.
AUREOS CLOSES DEBUT CENTRAL ASIA FUND
Emerging markets private equity firm Aureos Capital has closed a $100 million (€74 million) fund that will target investments in Kazakhstan and Azerbaijan. The fund will also look at deal opportunities in the Kyrgyz Republic, Georgia, Tajikistan, Turkmenistan and Uzbekistan. The fund has a target internal rate of return of 20 percent and will seek to make investments in the $2 million to $10 million range. Investors include UK government-backed fund-of-funds CDC, Norfund and the Netherlands Development Finance Company. The region has a thriving SME segment, driven by GDP growth, strong energy, mining and infrastructure sectors, and regional economic integration. Founded in 2001, Aureos has raised nearly $600 million for investments in Asia, Africa and Latin America.
ACTIS LEADS CHINESE INVESTMENT
Actis has led an $82 million (€61 million) financing round in Chinese silicon manufacturer Shunda. The firm invested $40 million while Chinese institutions Jolmo and Waichun contributed the other $42 million. Actis' investment comes out of its China Fund II, which closed in 2006 on $250 million. The fund is managed by Benjamin Cheng, who leads Actis' 11-strong China team in Beijing. Founded in 2003, Shunda supplies Suntech, one of Actis' portfolio companies and China's biggest solar cell manufacturer.
DEUTSCHE BANK HIRES FINANCIAL SPONSORS HEAD
Deutsche Bank has recruited Angus Barker from UBS as head of financial sponsors for Asia Pacific. Barker will be based in Hong Kong and report to Lee Zhang, head of global banking Asia Pacific, and Mark Epley, global head of financial sponsors. Barker was previously head of financial sponsors for non-Japan Asia at UBS. Before that, he worked at Potter Warburg, where he remained following its acquisition by UBS. Mark Epley said: “Growth in Asia continues to exceed expectations and [Barker's] expertise will add further depth to our financial sponsors platform in this important growth market.” Deutsche Bank recently hired Marla Heller to head its leveraged finance team in Australia and New Zealand.
OLYMPUS BUYS STAKE IN JAPANESE KIMONO RETAILER
London-based Olympus Capital has bought most of the stake owned by the founding family of Kyoto Kimono Yusen, a Japan-listed kimono retailer, for $67 million (€49 million). The price represents a 17 times earnings multiple and a 20 percent premium to the business' share price. Yuki Kawabata, the president of the business, will step down to be replaced by Shinji Saito, a company director and head of corporate planning.
IRONBRIDGE BUYS NEW ZEALAND'S MEDIAWORKS
Sydney-based buyout firm Ironbridge Capital has bought a 70 percent stake in CanWest MediaWorks, New Zealand's biggest media company, for NZ$386 million ($285 million, €210 million). CanWest is also trying to sell its 56 percent stake in Ten Network, ranked Australia's third most popular television station. The MediaWorks deal is Ironbridge's fourth investment in New Zealand. Founded in 2003, Ironbridge is currently investing its second fund, which closed in November 2006 on A$1 billion.
CARLYLE INVESTS IN KOREAN AFTER-SCHOOL PRIVATE EDUCATION
The Carlyle Group is to invest up to $20 million (€15 million) in Korea's Topia Academy, one of Korea's largest after-school education businesses. Founded in 1995, Topia offers supplementary curriculum classes to 10,000 elementary and high school students from 14 schools and 12 franchise schools. Wayne Tsou, head of Carlyle Asia Growth Capital, said: “We like this sector, which shows great resilience to economic cycles, and will continue to explore opportunities in this space in other Asian countries.” Carlyle Asia Growth Capital has offices in Beijing, Shanghai, Hong Kong, Mumbai, Tokyo and Seoul. It is currently investing a $680 million fund that it launched in 2005, Asia Growth Partners III.
TRIAGO HIRES DUBAI HEAD
Placement agent Triago Group has recruited Jean Aboumrad as head of its newly launched Dubai office. Aboumrad was previously director of investor relations at global fund management firm DTZ Asset Management. Before that, he was head of development for the Middle East at BLC Bank in Beirut. Triago, which has offices in Paris and New York, is seeking to establish a presence in the Middle East. Antoine Dréan, president of Triago, said: “Our ambition is to make the Middle East a third strong area of activity, alongside the US and Europe. It is important for us to strengthen our relationships with investors in this part of the world.” Founded in 1992 initially as a placement agent for GPs seeking to raise funds, Triago established Triago-X in 2004 for LPs seeking to divest private equity positions. The firm recently hired Jean-Marc Cuvilly from Probitas Partners to head its New York office.
SUN CAPITAL BUYS JAPANESE SNACK MAKER
US private equity firm Sun Capital Partners has bought Tarami, a Japanese fruit snack maker, for an undisclosed amount. Founded in 1988, Tarami's products include “Fruit Jelly” gelatine cups sold in stores under Tarami labels such as Kudamonoyasan and Dossari. Sun Capital has offices in Boca Raton, Florida, Los Angeles and New York, and affiliates in Tokyo, London and China. Founded in 1995, it has about $10 billion (€7.4 billion) under management.