Rohatyn ramps up in emerging markets with Citi deal

The Rohatyn Group will substantially expand its presence in emerging markets by acquiring Citi Venture Capital International, one of the bank’s few remaining in-house private equity divisions.

Emerging markets-focused The Rohatyn Group is to acquire Citi Venture Capital International, the emerging markets private equity group of Citi. The combined entity will operate under the name TRG. 

The transaction will significantly expand Rohatyn’s emerging market private equity assets: it is taking over $4.3 billion of investments and committed capital across five CVCI funds, leaving the combined group with $6 billion in private equity. The deal also gives the group fresh exposure to India, where it previously did not have a presence, and substantially increases its holdings in Hong Kong. TRG will have 18 global offices after the transaction – including a location in Santiago, Chile, a first for the firm. The deal is expected to close in the fourth quarter of 2013.

The acquisition continues the group’s strategy of expanding its presence in emerging markets, specifically Asia and Latin America. Last year, TRG acquired a 60 percent stake in CapAsia, an infrastructure private equity firm based in Singapore that focuses exclusively on non-BRIC emerging Asia, while in 2011 it purchased 50 percent of ARCH Capital, a Hong Kong-based private equity real estate firm focused on Asia. 

TRG’s funds will cover private equity, real estate, infrastructure, renewable energy, hedge funds, fixed income and inflation-linked bonds. The group is raising a private equity fund focused on Africa targeting $300 million, an Asia fund targeting $250 million and a clean energy fund focused on Mexico, which has already raised about $120 million, according to a source familiar with the matter.

TRG declined to comment on fundraising. 

CVCI chief investment officer Marc Desaedeleer will join TRG’s executive committee, and will also join the firm’s management committee which oversees its private equity investing business, chaired by TRG’s Miguel Gutierrez. CVCI partners Enrique Bascur, Bob Khanna, Sunil Nair and Ji Min will also join the management committee. Dipak Rastogi, who founded CVCI, will not be transitioning to TRG. 

In an internal CVCI memo seen by Private Equity International, CVCI cited the bank’s efforts to comply with the Volcker Rule as the reason for the transaction with TRG, the earliest discussions for which took place around March and April of this year.

“CVCI has one of the very few teams in the industry that has created value for its investors while operating exclusively in the emerging markets, and we believe this combination offers the best opportunity for CVCI's employees and investors to partner with an independent investment firm with equally extensive emerging markets investment capabilities and global reach,” the memo said.

Founded in 2001 as part of Citi’s alternative asset management platform Citi Capital Advisors, CVCI was one of Citi’s last remaining in-house private equity divisions. The bank, which has had an extensive history in the asset class, has shed billions of alternative assets in its efforts to comply with new regulations.