Hony backs $1b COFCO Capital mixed ownership reform deal
Hony Capital has committed RMB1.8 billion ($271 million) to COFCO Capital Investment, a subsidiary of Chinese state-backed COFCO Group. It is the largest participant in a RMB6.9 billion mixed ownership reform deal.
The government has been encouraging private investment in state-owned enterprises (SOEs) as part of what it calls a mixed ownership model, with a view to enhancing private sector best practices without ceding government control.
COFCO Group is restructuring its business under such an initiative. It plans to introduce mixed ownership into its 18 subsidiaries by the end of next year and have more of them list on public markets. Fourteen subsidiaries, including COFCO Capital, have now been restructured, attracting RMB20 billion in private investment.
COFCO Capital was established in 1997 as the financial services arm of the parent group. It offers a wide-range of investment products and financial services including trusts, futures, life insurance, banking, and industry-focused funds.
Hony Capital is the second-largest shareholder in COFCO Capital after COFCO Group, which still owns holds a 60% stake. There are six other investors in the deal, including China Structural Reform Fund – which committed RMB800 million – and Beijing Capital Agribusiness Group, and Guangdong Wen’s Foodstuff Group, according to a statement.
“The combination of state and private sectors, agricultural and financial investors, will create a platform of harmony and cooperation, which will better serve COFCO’s global agricultural supply chain,” China Chengtong Group, which runs the China Structural Reform Fund, said in a separate statement.
Last month, the fund took part in a RMB78 billion investment in China Unicom, another state-owned enterprise looking to restructure its ownership. Several domestic technology companies such as Tencent Holdings, Baidu, and Alibaba also became shareholders in the company.
Founded in 2003, Hony was an early mover among private equity firms in pursuing SOE restructuring deals. As of 2015, the GP had participated in 33 SOE transactions that involved RMB2 trillion in assets. It closed its latest fund at $2.7 billion in April of last year, with a significant portion of the corpus expected to be deployed in SOEs.
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