AVCJ Awards 2016: Fundraising of the Year - Large Cap: PAG Asia Capital

Weijian Shan, group chairman and CEO of PAG Asia Capital, is recognized for arguably the most salient example of a carve-out from state-owned enterprise (SOE) in China, having secured control of Shenzhen Development Bank (SDB) while at Newbridge Capital. Eleven years on from that deal, he wishes there were more examples to look back on.

"It's only from time to time you encounter deals of this nature," he says. "With SDB, the opportunity came about because there were so many non-performing loans and the company was struggling. It was a similar situation with Herald International Financial Leasing, which was acquired by PAG. The operation wasn't going anywhere, it was sub-scale, and its potential was not being fully realized. We are very familiar with financial institutions and so we saw value that the SOE could not see."

Herald, an auto leasing specialist with clients such as Audi, Volkswagen and Volvo, was one of about a dozen portfolio companies in PAG's debut fund, which closed at $2.5 billion in 2012. The GP paid around $100 million for the asset in 2013 and then agreed a sale to BMW towards the end of last year for an undisclosed sum. As of December 2015, the distributions to paid in (DPI) on the fund was 68% - said to be higher than industry peers of a similar vintage.

"We were quite motivated to generate liquidity for our LPs. Many investors are concerned about this in Asia, and particularly in China where there are not many exits and not much liquidity," says Shan. "Arguably we could have held some investments longer, but as a first-time fund we wanted to demonstrate an ability to exit."

These exits likely contributed to a swift fundraising process for Fund II. PAG spent less than seven months in the market, announcing a first and final close of $3.65 billion - well in excess of the initial target of $3 billion - in December 2015. The strategy remains the same: a 40-strong team of investment professionals, supported by a six-person operations team, pursues control deals and structured investments across Asia.

Two announced deals reflect the breadth of transaction type. In August, PAG completed the acquisition of Golden Apple Education Group after spending 12 months disentangling the otherwise healthy company from the creditors of its beleaguered parent. More recently, the firm closed the $3.6 billion purchase of US-based Lexmark International, working alongside local strategic player Apex Technology and Legend Capital.

Shan is non-committal on whether he expects more of the same from China - or indeed whether further SOE carve-outs are likely - noting that the country has always represented a challenge in terms of deal-sourcing. "It is a market where the trust level is relatively low, so once you have built a reputation or some sort of brand you typically get more than your fair share of the market," he says. "People like to do business with known quantities."

Pictured: Tim Morrison (right) of PAG Asia Capital collects the award from Ernest Boles of HQ Capital 

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• Topics
• Fundraising
• Buyout
• GPs
• Asia
• PAG
• AVCJ Awards