CITIC Capital hits $1.3b first close on new China fund

The first close on CITIC Capital China Partners IV, confirmed by sources familiar with the fundraise, comes nearly 18 months after the private equity firm closed its previous vehicle at $1.57 billion. CITIC declined to comment on fundraising.

Fund III was the first for which the GP combined its China and international teams, which had previously managed separate funds. The former pursued investments within China while the latter bought foreign companies that had a China expansion angle.

Combining the strategies has delivered a string of international deals. In the past 12 months, CITIC has acquired the sexual health unit of Australia-listed Ansell, New Zealand skincare and fragrances specialist Trilogy International, cosmetics industry packaging supplier Axilone, and Euromoney Institutional Investor's financial information database division. Several of these deals featured strategic partners.

Corporate carve-outs have been another important theme, with the Ansell and Euromoney transactions both meeting these criteria. In addition, CITIC partnered with Baring Private Equity Asia on the purchase of English language training provider Wall Street English and worked with CITIC Group and The Carlyle Group on the acquisition of the McDonald's business in mainland China and Hong Kong.

Speaking to AVCJ earlier this year about the appeal of carve-outs, Eric Xin, a senior managing director at CITIC, said: "The management team is motivated, a lot of bureaucracy can be removed, and improvements can be made through localization. In addition, valuations are not totally price-driven, it is more attractive than buying from another PE firm. When a multinational is struggling with its China business it wants a partner."

Most recently, the private equity firm participated in a $590 million investment in US-listed biopharmaceuticals player China Biologic Products. It had previously submitted a $3.65 billion take-private offer for the company but withdrew this bid to back the new share issue.

The flurry of US dollar deal activity has resulted in the deployment of CITIC Capital China Partners III outpacing that of the renminbi vehicle – which had a target of RMB3 billion ($439 million) – launched in parallel with it. Given the regulatory approvals involved, it wasn't possible to commit capital from the renminbi tranche with the same degree of certainty as the US dollar tranche. As such, there is no parallel local currency fund alongside Fund IV.

There are several other mid to large-cap China-focused funds currently in the market. Primavera Capital Group reached a first close of $1.5 billion in May for its third vehicle, which has an overall target of $2.8 billion. A month later, Centurium Capital – a GP established by ex-Warburg Pincus China head David Li – completed a $1 billion first close on its debut fund. A hard cap has been set at $1.5 billion.

Three other mid-market spin-outs are also fundraising: DCP Capital Partners, formed by David Liu and Julian Wolhardt, previously of KKR; Nexus Point, established by ex-MBK Partners executive Kuo-Chan Kung; and Rivendell Partners, set up by Alex Ying, formerly of The Carlyle Group. Other established GPs in the market include CDH Investments, Hopu Investments, and the two entities that came out of New Horizon Capital – Advantech Capital and Redview Capital.

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• Topics
• Greater China
• Fundraising
• Buyout
• GPs
• CITIC Capital