China Everbright pushes for cross-border deals

China Everbright Limited (CEL), the Hong Kong-based investment arm of the eponymous group, is busy extending its global reach and influence.

Private equity players outside Hong Kong and mainland China may not have heard of CEL, but the firm is becoming increasingly important abroad. It was formed in 1997 when parent company China Everbright Group, a state-owned financial conglomerate with assets under management of approximately 3 trillion yuan ($445 billion; €405 billion), decided it wanted a fund management and financial advisory business in Hong Kong.

CEL's track record ranges from holdings in the Shanghai Film Art Academy, to Beijing Huichen Nursing Home and Shanghai Micro Electronics Equipment. It has backed and incubated high growth Chinese companies through 33 private equity, mezzanine and venture capital funds. These have raised more than HK$68 billion ($9 billion; €8 billion). In 2015, CEL posted a net income of HK$2.1 billion, up 26 percent from 2014, and returned HK$5 billion to its investors, double its distributions from the previous years.

Investors in CEL's funds include Axiom Asia Private Capital, MinHang District of Shanghai Municipal Government and Wuxi Guolian Development Group, according to PEI data.

One area in which CEL has been particularly aggressive is overseas deals. Shengyan Fan, managing director of CEL's mergers & acquisitions department, says the focus is on buying portfolio companies which can bring their products and technologies to China.

Earlier this year, the firm acquired Israeli 3D printing company XJet, whose nano metal jetting technolo-gy it aims to introduce to China's manufacturing sector. Last year, it bought US biotech company Ambrx, aiming to develop a biologics deve-lopment centre in China. The firm is in market with its CEL Global Investment Fund, which had raised $264 million of a $500million target, as of August. The fund, which focuses on US and European companies looking to enter China, has invested in Michigan-based manufacturer Burke Porter Machinery and British precision surfacing solutions company Lapmaster Group Holdings.

Hugo Shong, founding partner of San Francisco-based venture capital firm IDG Capital Partners, characterised CEL as “a very influential financial institution in China, possessing great business network and strong capability”. In June, CEL and IDG launched a $3 billion IDG-Everbright M&A Investment Fund, which will pick up stakes in Chinese companies seeking expansion abroad.

CEL has also partnered with Nasdaq-listed Chinese media advertising agency Focus Media and launched a $750 million fund, called the New Industry Development Fund, which will invest in the country's techno-logy, media & telecommunications sector. CEL chief executive officer Chen Shuang said the fund, launched in the third quarter of 2016, “will take advantage of the industry investment opportunities brought about by China's industry restructuring, consumption upgrading and 'internet plus' strategy”. 

When it comes to capitalising on the growth of the country's consumer market, CEL is not alone. Hong Kong-based FountainVest Partners recently held a final closing on its largest China-focused fund to date on $2.1 billion, while Warburg Pincus is raising $2 billion for a new China private equity fund to invest alongside its latest $12 billion global fund.

With so much capital to be invested, the country's private equity market is maturing and becoming ever more competitive. US and European private equity firms should not be surprised at all to find CEL scouring their parts of the world for investment targets.