TPG, Carlyle lead $1.9b round for Baidu's financial services unit

Other participants include domestic insurer Taikang Group and an offshore investment unit of Agricultural Bank of China. Du Xiao Man will receive $840 million of the proceeds, with the rest being used to acquire equity from Baidu. The internet company will reduce its holding to approximately 42%.

The TPG contribution alone amounts to $1 billion. It constitutes commitments from the firm’s Asian fund, its global growth capital business, and impact investment vehicle The Rise Fund, as well as from co-investors. This represents Rise’s first investment in China. It is driven by the Baidu unit’s involvement in providing loans for education and to customers with limited credit access.

Launched in 2015, the unit is a consumer lending and wealth management platform. Leveraging the user data generated by its parent company and proprietary analytics, it conducts risk assessment on customers and provides financing and investment products tailored to their needs. The unit had a loan balance sheet of RMB28 billion at end of 2017.

“As savings and lending activities move online, technology companies are able to use their big data analytics to offer flexible micro-financing to the younger generation of customers,” Chang Sun, a managing partner with TPG in China, said in a statement. “Baidu financial services group is using technology and advanced analytics to capture this exciting growth opportunity.”

Baidu’s decision to spin out its financial services business follows similar decisions by technology counterparts JD.com and Alibaba Group. Last year, JD.com sold its 68.8% stake in JD Finance to third-party investors for RMB14.3 billion. It will take 40% of JD Finance’s pre-tax profits once the business becomes profitable or it can swap that right for a 40% equity stake. The unit raised RMB6.65 billion in funding in early 2016.

JD Finance offers payment services and financial services such as small loans and wealth management to small merchants and consumers, as well as combining big data, cloud computing, and artificial intelligence capabilities to work with financial institutions in areas such as credit-checking. It also makes investments in start-ups.

Ant Financial, which raised $4.5 billion at a valuation of $60 billion in mid-2016 and is reportedly in the process of finalizing an even larger round, has a similar – though more mature – commercial profile. Both JD Finance and Ant Financial are expected to pursue public listings.

This is not the first time TPG, which is currently targeting between $4.5 billion and $5 billion for its latest Asia fund, has made a minority investment in a Chinese internet-based technology play. Last year, it participated in a $600 million Series E round for bicycle rental platform Mobike. In early April, Meituan-Dianping, China’s largest online-to-offline services platform, agreed to buy Mobike in a deal worth $2.7 billion.

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• Topics
• Greater China
• Financials
• Expansion
• Technology
• China
• TPG Capital
• Baidu
• Financial Services