Cathay forges Sino-French ties

Around the same time China Development Bank (CDB) and Bpifrance, a subsidiary of French state-owned bank Caisse des Dépôts, announced a EUR100 million commitment to the fund launched by Sino-French PE firm Cathay Capital.

The EUR500 million vehicle, the firm's largest to date, will support the international expansion of mid-cap French and Chinese companies. Cathay Midcap Growth Fund III carries the same core investment theses as its predecessors, but there have been a few strategic tweaks.

"The first distinction is the size of the companies we will invest in," says Mingpo Cai, Cathay's president. "We are going to invest around EUR30-50 million per company, with an enterprise valuation above EUR120 million. It is a continuation of what we do, but with a bigger ticket size."

Cathay currently has EUR420 million in assets under management. This latest fund is more than seven times the size of Cathay Capital I, a EUR70 million vehicle that launched in 2007 and invested in 18 French and Chinese companies between 2008 and 2011. The 2011 vintage Fund II received commitments of almost EUR190 million and is still being deployed.

LPs in Fund I mainly consisted of French family offices and a small group of institutional investors. It wasn't until September that CDB and Caisse des Dépôts came on board, creating a EUR150 million vehicle to invest in cross-border small- and medium-sized enterprise (SMEs). This was subsequently rolled into Fund II.

Cai argues that the cross-border expansion of Chinese and French companies still represents a largely untapped opportunity and one that appeals to LPs. He is confident that the fund will reach a first close of EUR350 million by June.

Fund III will focus on the same sectors that have previously benefited from this cross-border strategy, such as healthcare, veterinary medicine, consumer goods, distribution and cleantech. Cai is particularly interested in providing Chinese companies access to French technologies, whether this is through partnerships in China or acquisitions in France.

However, another key distinction is that Cathay is no longer limited to France. While previous vehicles split their corpuses equally between French and Chinese companies, Fund III is expected to deploy 40% of its capital in China, 40% in France, and 20% elsewhere in Europe.

"We have essentially positioned ourselves is as very local firm which a very international scope "says Cai. "Our aim to make our European entrepreneur feel at home in China and our Chinese entrepreneurs feel at home in Europe."

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• Topics
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• Cathay Capital Private Equity