FountainVest poised for first close on latest China fund

The GP has set the hard cap at $3.2 billion, according to sources familiar with the situation. Existing investors account for the bulk of the first close, though there is some new money as well.

FountainVest closed Fund III at $2.1 billion in 2016, with support from longstanding anchor investors Ontario Teachers' Pension Plan (OTPP) and Canada Pension Plan Investment Board (CPPIB). 

The firm - established in 2007 as a spin-out by members of Temasek Holdings' China investment team - pursues minority and control investments in companies that in some way benefit from the growth of China’s middle class. It is active in the consumer, media and technology, healthcare, industrials, and financial services sectors. Control or co-control transactions became more prominent from the firm’s second fund onwards.

Sizeable buyouts in Fund III include a EUR4.6 ($5.23 billion) take-private of Finland-listed Amer Sports, which owns brands such as Salomon, Atomic, and Louisville Slugger. FountainVest partnered with Anta Sports, Tencent Holdings, and the founder of Lululemon Athletica on the deal. It also acquired Hong Kong fitness center and yoga studio operator The Pure Group with OTPP.

FountainVest’s minority investments range from growth rounds for Chinese technology start-ups – such as car trading platform Chehaoduo Group and online education player Zuoyebang – to PIPE deals. A notable example of the latter is Laobaixing, a pharmacy chain in which FountainVest and Primavera Capital Group acquired a 24.78% stake for $557 million last December. The position is now worth about $1.2 billion.

There have been two trade sale exits so far this year, with Enzo Jewelry sold to Hong Kong’s Chow Tai Fook and Shanghai Kehua Bioengineering offloaded to Gree Real Estate. FountainVest is also said to have completed its exit from online-to-offline services player Meituan-Dianping, which listed in Hong Kong two years ago, with a 5x return.

FountainVest closed its first fund at $950 million in 2008 and its second at $1.35 billion in 2016. The firm has also raised one renminbi-denominated fund, which closed at RMB1.7 billion in 2018.

A total of $13 billion has been committed to US dollar China funds so far this year, compared to $23.2 billion for the whole of 2019. While venture capital fundraising activity remains robust, with the 2019 total already exceeded, China buyout and growth managers have received just $3.8 billion, prior to any FountainVest contribution. They raised $15 billion last year.

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• Topics
• Greater China
• Fundraising
• Buyout
• GPs
• China
• Fountainvest Partners