Bain buys Chinese data center services business

The transaction involving Xiamen Qinhuai Technology was agreed in late December and received shareholder approval last week. Three executives from NetScience, including Chengyan Liu, the company’s chairman, have contributed approximately RMB300 million for a combined 20% stake. The total committed by all investors also covers the repayment of some shareholder loans.

Established in 2017, Qinhuai provides cloud infrastructure planning, investment, construction, and testing and operation services. It primarily builds and operates data centers as well as maintaining server equipment. NetScience said the divestment would ease financial pressure and facilitate investment in asset-light areas, notably content delivery networks, cloud security, and cloud computing.

According to a January filing, most of Qinhuai’s data center projects are at the planning or early development stages. They require significant upfront investment and the recovery period is relatively long. Qinhuai posted losses of RMB44.9 million and RMB17.6 million, respectively, for 2017 and the first half of 2018. These losses weighed on NetScience’s overall performance.

On a broader level, data infrastructure services in Asia, including data centers, are seen as a compelling trend for investors thanks to the continued growth of industries like artificial intelligence, virtual and augmented reality, and the internet of things (IoT).

In China specifically, Warburg Pincus partnered with US-listed Chinese internet services provider 21Vianet on a joint venture focused on developing and acquiring data centers. It also invested $300 million in Princeton Growth Ventures (Princeton GV), a telecom, media and technology (TMT) buy-out platform that seeks to acquire assets in emerging markets, including China.

Bain is investing in Qinhuai through its third pan-Asian fund, which closed at $3 billion in late 2015, not including an employee contribution of at least $250 million. Last December, the private equity firm reached a first and final close on Fund IV at the institutional hard cap of $4 billion. Employees of the firm and related parties will contribute a further $650 million.

Hina Group served as exclusive financial advisor to NetScience on the Qinhuai divestment.

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• Topics
• Greater China
• Technology
• Infrastructure
• Buyouts
• China
• Bain Capital Asia