CDH to make distributions of $1b for the year

"Last September at our annual LP meeting we said we would return $1 billion in cash and we are now about halfway," Shangzhi Wu, CDH's chairman and managing partner, told AVCJ. "We continue to liquidate our positions so we should meet our target."

The firm, created in 2002 when regulators required China International Capital Corp. (CICC) to spin-out its private equity unit, is currently raising its fifth US dollar-denominated fund, which has a target of around $2 billion. A first close of $1 billion was reached in February. CDH completed fundraising for its second renminbi vehicle in the third quarter of 2012, having accumulated RMB8 billion ($1.3 billion).

CDH started out with six partners but has since expanded to 45, of which about a dozen are deal leaders. There is also an operating team of seven people, including two former CEOs, one former CFO, the ex-head of human resources at a multinational, and an executive who previously served as a division manager at the China Securities Regulatory Commission (CSRC).

"The original idea to setting up an operating team was to prepare ourselves for buyout situations. In the next three years, most of the deals will be for minority positions, but there potentially will be an increasing percentage of control deals," Wu said.

However, he remains of the belief that a China fund focused purely on buyouts is too risky because deal flow is not guaranteed. The ideal strategy is a combination of large growth deals and control deals. CDH's average investment size is about $100 million.

The private equity firm invested in Sunac in 2007, took the company public in Hong Kong three years later, and completed the last of several partial exits last November. Belle International was a similar offshore restructuring story, completing an IPO in 2007, while software company Qihoo 360 was taken from start-up to NASDAQ by CDH's venture capital arm.

CDH and CITIC Capital Partners acquired Aotecar from Nanjing Lukou Airport in 2007 in what was one of the first state-owned enterprise buyouts in China by offshore funds. The asset was sold to domestic player Tianyou Investment in April.

Modern Dairy is the most high-profile of the exits, given the sector and the timing of the investment, which came not long after the 2008 dairy scandal. CDH paid $52 million for a 10.5% stake as part of a co-investment with KKR. Modern Dairy went public in 2010, allowing a partial exit, but CDH sold the bulk of its holding to China Mengniu Dairy earlier this month.

For the unabridged version of Wu's interview with AVCJ, please click here.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Exits
• Greater China
• Expansion
• Buyouts
• buyout
• Growth capital
• CDH Investments Management
• Exit
• China