Richard Ong’s RRJ Capital makes first deal

Ong's recently launched fund, RRJ Capital, has teamed with Singaporean sovereign wealth fund Temasek Holdings to take a 70% controlling stake in Texas-based Frac Tech. According to the press release, the deal is funded by $1.7 billion worth of debt and is expected to close in the second quarter of this year. In addition to RRJ and Temasek's investment, Chesapeake Energy Corporation, a US natural gas producer, will also boost its holding in Frac Teck to 30% from 26%. Bank of America Merrill Lynch and Citigroup advised the investors.

The news comes weeks after RRJ Capital was said to complete its first close at $1.5 billion. It aims to meet its $2 billion target by June. The fund's $2 billion size ranks RRJ Capital among the largest vehicles dedicated to Asian markets, and is said to focus on similar sectors as Hopu. However, AVCJ earlier reported that Ong intended to adhere more strictly to traditional private equity investment style deals as opposed to Hopu's position as a more flexible investor, which included hedge fund-style block trades and banking type roles.

With RRJ's focus on Asia, its first investment to a US-based firm is seemingly off strategy. Frac Tech claims to be the fourth-largest provider of well-stimulation services in the U.S. exploration and production industry, and does not have operations in Asia.

The company itself was vague on this point, noting, "We believe this partnership will allow us to further drive our growth strategy and to continue delivering quality service to our customers, based on the unique relationships and opportunities introduced by our partners." Frac Tech said nothing further about its business' relationship to Asia or Asian investors.

One regional GP speculated on why RRJ would make its maiden investment in a company outside of Asia, noting that Ong probably saw a China or Pan-Asian angle that can be capitalized on in the future, or his LPs found the area lucrative and endorsed the stake acquisition. "I understand that Ong is pretty tight with Temasek as it was a large investor in Hopu, and they have co-invested on many deals, including last year into Chesapeake Energy, which is also a co-investor in Frac Tech," the GP told AVCJ. "There probably is some plan that has not been announced. For example, could Frac Tech be looking to launch some JV operations in China, bringing its technical expertise to the market? A local partner may have already been lined up, hence it make sense to do the US deal first."

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• Topics
• Buyouts
• North America
• People
• Hopu Investment Management
• Temasek Holdings