Yunfeng records $2.5b final close on third China fund
Yunfeng Capital, a Chinese private equity firm established by Jack Ma and David Yu, founders of Alibaba Group and Target Media, respectively, has raised $2.5 billion for its third US dollar-denominated fund.
This figure, disclosed in a US regulatory filing, does constitute the full amount raised and the vehicle has reached a final close, according to a source familiar with the situation. Yunfeng said in the filing that it had received commitments from 51 investors. These include Chinese consumer electronics retailer Suning, which announced last month it would invest up to $210 million.
Yunfeng Fund III is expected to target companies involved in internet and e-commerce activities, media and entertainment, enterprise services and technology, and healthcare. Its remit is like that of the firm’s earlier vehicles. Fund I closed on $307 million in 2010, sourcing capital from around 20 Chinese entrepreneurs. The firm then raised $1.1 billion for Fund II in 2014, having diversified its LP base to include global institutional investors.
Confirmed deals agreed by the new fund include the $190 million acquisition of LivaNova’s cardiac rhythm management business and the $1.4 billion take-private of Chinese healthcare services provider iKang Healthcare Group. These are co-investments with Hong Kong-listed medical device manufacturer MicroPort Scientific Corporation and Alibaba, respectively.
The two transactions reflect three trends in Yunfeng’s investment strategy. First, an increasing willingness to pursue overseas assets that have a China angle. In the past 12 months, the firm has also supported a Chinese consortium to acquire Italy-headquartered medical diagnostics manufacturer Esaote and partnered with Hybio Pharmaceutical to buy diversified German biopharmaceuticals company AMW.
Second, a strong focus on healthcare. In addition to the three above three deals, Yunfeng has participated in sizeable rounds for domestic biopharma players Brii Biosciences, CStone Pharmaceuticals and for genome sequencing business WuXi NextCode.
Third, a tendency to leverage the Alibaba connection, either through co-investment or Alibaba backing companies in which Yunfeng is an existing shareholder. The e-commerce giant, which has previously invested in Yunfeng funds, has said that the GP's expertise, knowledge and contacts are helpful in developing strategic investment opportunities. Ma has waived any voting power he has regarding Yunfeng funds and donates all distributions he receives from these vehicles to charity.
Most recently, both Yunfeng and Alibaba participated in a $600 million Series A round for Suning’s sports unit, which holds the domestic media rights to a range of sporting competitions. Alibaba has a strategic partnership with Suning, under which the two companies hold shares in one another and collaborate on various initiatives, while Yunfeng is one of 15 investors in Suning’s financial services unit.
In the last year, Alibaba and Yunfeng have also participated alongside one another in funding rounds for cloud storage business Qiniu Information Technology and electric car manufacturer Xpeng Motors, while Alibaba led a $600 million Series C for SenseTime, an artificial intelligence specialist in which Yunfeng is a shareholder.
The majority of Yunfeng’s deals do not feature Alibaba – it joined a Tencent Holdings-led round for online used car trading business Guazi earlier this year - and they vary markedly by size and stage. For example, the firm co-led a $40 million Series B for online content provider Beijing Jinying Technology last November and then in June took part in a $500 million Series D-plus round for English language learning platform operator VIPKid. In addition to its US dollar funds, Yunfeng has three renminbi vehicles.
The firm claims to be invested in at least 16 unicorns valued at $1 billion or more. In addition to Alibaba affiliates Ant Financial, Cainiao, Koubei, and Ali Sports, these include Contemporary Amperex Technology, Xiaomi, Ucar, Guazi, Yiguo, Manbang, Xpeng, VIPKid, WuXi NextCode, Qiniu, Yitu, and Xiaozhu.
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