FountainVest raises $2.1b for third China fund

FountainVest China Capital Partners Fund III was oversubscribed, with existing LPs accounting for the bulk of commitments. Formal marketing began in early April and a first close of $1.7 billion followed in early July.

The largest anchor investors in the previous two funds - Ontario Teachers' Pension Plan (OTPP) and Canada Pension Plan Investment Board (CPPIB) - both re-upped, according to a source familiar with the situation. Pension funds, sovereign wealth funds, insurance companies and other institutional investors from North America, Europe, Australia, Middle East and Asia make up most of the LP base.

Fund III is larger than its predecessor, which closed at the hard cap of $1.35 billion in 2012. In addition to OTPP and CPPIB, LPs in Fund II included Temasek Holdings and Washington State Investment Board. The GP closed its debut fund at $950 million in 2008.

FountainVest was set up in 2007 by Frank Tang, George Chuang, Chenning Zhao and Terry Hu, all of whom were previously members of Temasek' China investment team. The GP follows three main themes: the rise of the middle class and domestic consumption, urbanization and industrialization, and sustainable development. The investment strategy for the new fund remains largely the same.

"We remain confident about China's opportunities. The private sector, while not new as a key growth engine of the economy, has come of age. We believe that industry consolidations will intensify, mergers and acquisitions will create national leaders," Tang (pictured), the firm's CEO, said in a statement. "In the context of an increasingly complex operating environment, opportunities for value creation through sector expertise and operational enhancement are more prevalent than before."

FountainVest has seen several liquidity events over the last 12 months. Focus Media, a Chinese outdoor advertising business taken private in 2013 by the CEO and a consortium of PE investors, re-listed in Shenzhen via a reverse merger. FountainVest made a partial exit in a transaction that valued the business at about $7 billion.

The GP then partnered with the portfolio company to launch a $400 million sport industry-focused fund; the pair also participated in a joint venture with US-based talent and event management firm WME-IMG to develop sports and entertainment businesses in China.

In March, FountainVest and CMC Capital Partners made partial exits from IMAX China - having taken the company public in Hong Kong last year - after agreeing to an extended lock-up period for the rest of their shares.

The GP also sold Key Safety Systems (KSS), a US-based auto components maker that it acquired in 2014, to Shanghai-listed Ningbo Joyson Electronic Corporation for $920 million. CPPIB participated as a co-investor in the deal alongside FountainVest and existing owner Crestview Partners. The pension fund said it generated a 2.5x money multiple and proceeds of $182 million from the KSS deal.

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• Topics
• Greater China
• Fundraising
• Media
• Consumer
• Healthcare
• Buyout
• Growth
• China
• Fountainvest Partners
• Temasek Holdings
• Growth capital
• LPs
• Canada Pension Plan Investment Board (CPPIB)