Warburg biggest investor in $2.4bn China deal

The firm joins Khazanah, Goldman and strategic investors in backing bad loans bank China Huarong

Private equity firm Warburg Pincus, Malaysian sovereign wealth fund Khazanah Nasional and Goldman Sachs have joined a slew of domestic strategic investors in the $2.4 billion pre-IPO investment in China Huarong Asset Management, one of the country’s big four financial asset management companies.

The consortium, which also includes China Life Insurance, CITIC Securities, China International Capital Corporation, China National Cereals, Oils and Foodstuffs Corporation and Fosun International, will take a combined 20.98 percent stake in the company, according to a statement.

While specific details on how much each investor put into the deal weren't disclosed, people familiar with the matter said that Warburg Pincus was the largest investor.

China Huarong – China’s largest financial asset manager by total assets ($66.5 billion) – intends to seek an initial public offering following the sale, according to the firm. It will also launch extensive partnerships with the strategic investors in various business areas, including asset management, investment and financing, investment banking, financial leasing, risk management, internal controls and employee training.

The partnerships are intended to help China Huarong enhance its capital strength and structure, improve corporate governance and introduce international standards to improve its operational capabilities and services to the economy.

“The strategic alliance between China Huarong and Warburg Pincus marks a significant milestone for both of our groups. Our investment into Huarong marks one of the largest deals in the financial services sector globally and the largest single investment in China,” David Li, managing director at Warburg Pincus Asia, commented.

“We are confident with the long-term growth prospects of Chinese economy and financial services industry. Despite softened growth, [the] Chinese economy has demonstrated impressive growth, and investment will remain one of the important drivers for the economic growth. We believe that demand for financing will remain strong and persist in the foreseeable future,” he added.

Lai Xiaomin, chairman of China Huarong, said in a statement, “This is an important milestone for China Huarong, marking a positive step by a state-owned financial asset management company to explore the mixed-ownership structure for state-owned enterprises. All of the eight strategic investors are leading institutions with solid track records and outstanding reputations in their respective fields and markets.”