WL Ross backs joint venture to acquire China steel assets
WL Ross & Co, the private equity firm founded by recently appointed US Commerce Secretary Wilbur Ross, has announced its first China investment in over five years, backing a joint venture to acquire steel industry assets in the country.
Hwabao Investment Group, the investment arm of China Baowu Steel Group, will join WL Ross, US-China Green Fund, and China Merchants Finance Holdings to form Four Rivers Investment Management Company. According to a statement, the JV will commit RMB40-80 billion ($5.8-11.6 billion) to underperforming China steel assets with the goal of improving operations, reducing overhead and streamlining distressed balance sheets.
“With roughly 50% of global capacity, China clearly represents the fulcrum of the steel making industry," said Stephen Toy, senior managing director and co-head at WL Ross. "By establishing this vehicle with world-class partners anchored by one of the world's largest and most advanced steel companies, we believe we will be well positioned to create long-term value through a transformational investment approach."
WL Ross has been largely absent from Asia in recent years: AVCJ Research shows the firm’s last deal in the region was joining China Investment Corporation and several other investors in 2011 to buy energy-focused transportation company Diamond S Shipping for $600 million. At the time the GP was reported to be struggling to raise its fifth fund amid a challenging global fundraising environment.
Four Rivers will be headquartered in Shanghai. Hwabao Chairman Zhuping Zhou will serve as CEO, while former China Merchants Bank CEO Weihua Ma will become chairman.
The announcement comes as Wilbur Ross, who founded WL Ross in 1997 and stayed on as chairman and chief strategist after selling it to Invesco in 2006, severs ties to the firm and transitions to his new role in the Trump administration. A spokesperson for WL Ross said Ross had no involvement with the deal, and the Commerce Department denied any connection between the timing of the announcement and the Chinese president Xi Jinping’s visit to the US, which was ongoing at the time.
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