China’s Legend Holdings files for Hong Kong IPO

Legend is best known as the parent of Chinese computer manufacturer Lenovo Group. Other holdings span financial services, chemicals, property, agriculture and food, and modern services. It is also an LP in all of Hony and Legend Capital's funds - as well as owning interests in the GPs - and wholly owns start-up incubator Legend Star.

Legend Capital and Hony were set up in 2001 and 2003, largely at the instigation of Chuanzhi Liu, Legend's founder and president. According to a prospectus, this was done in recognition of the need for non-bank financing and demand for improved management and strategic vision in the public and private sectors as a result of economic reforms.

"China had just held the 16th Party Congress at which it was declared that state-owned enterprise (SOE) privatization would be encouraged, especially among those operating in competitive fields," John Zhao, CEO of Hony, told AVCJ in a previous interview. "Mr. Liu sensed this would be a good opportunity for Legend; I wanted to start an investment firm but wasn't sure whether to do it myself or partner with somebody. We decided it would be best for both to work together."

Legend contributed all the capital for Hony's $36 million debut fund, although the vehicle had a standard GP-LP structure. The first investment was the acquisition of an asset management company from Bank of China that had a portfolio of 28 PE investments. This enabled Hony to demonstrate it could work with SOEs and restructurings of such companies remain a key part of its investment strategy.

The prospectus identifies Legend Investment as the holding vehicle for Legend Capital. It has registered capital of RMB429.5 million ($69 million) and is 55.3%-owned by Legend Holdings.

As of December 2014, total commitments in Legend Capital's US dollar- and renminbi-denominated funds amounted to $1.63 billion and RMB7.19 billion, respectively. Hony has received commitments of $4.46 billion for its US dollar funds and RMB16 billion for its renminbi vehicles. Legend Capital closed its sixth US dollar fund at $500 million last year, while Hony is currently investing its fifth US dollar fund, which closed in early 2012 at $2.36 billion.

Since 2010, Legend has made strategic investments in sectors expected to benefit from consumption growth in China. These include car rental business China Auto Rental, dental chain Bybo, education-focused insurance broker Union Insurance, and fruit producer Joyvio.

China Auto Rental, which is also a portfolio company of Warburg Pincus, raised $467 million through a Hong Kong IPO last year. The company was backed by Legend Capital in 2010 and the following year Legend made a strategic investment of approximately RMB207.8 million. Legend holds a 20% non-controlling interest in China Auto Rental's majority shareholder Grand Union Management.

Legend posted revenues of RMB288.9 billion in 2014, up from RMB243.6 billion the previous year. Net income rose from RMB7.71 billion to RMB7.82 billion over the same period.

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• Topics
• Greater China
• Investments
• LPs
• Legend Capital
• Hony Capital
• China
• IPO
• LPs