CPE hits $1.8b first close on China fund

The firm – formerly known as CITIC Private Equity – has set an overall target of $3 billion, up from $2.2 billion in the previous vintage, according to a source close to the situation.

CPE is the latest in a string of China-focused private equity firms in the market. FountainVest Partners launched its fourth fund in the final quarter of 2020 and achieved a first close of more than $1 billion – against a target of $2.8 billion – before year-end. Since then, Boyu Capital and Primavera Capital Group have launched new funds with targets of $6 billion and $4 billion, respectively.

Total China private equity fundraising came to $51.8 billion last year, down from $78.7 billion in 2019, according to AVCJ Research. Commitments to US dollar vehicles fell to $15.1 billion from $24.1 billion. Strip out venture capital funds and the US dollar total was $5.3 billion in 2020, down from $16.7 billion the previous year. The record for US dollar ex-venture capital is $16.9 billion in 2018.

CPE closed its first US dollar fund at $990 million in 2011 and its second at $1.29 billion in 2015. Including two renminbi funds, it claims more than RMB100 billion ($15.3 billion) under management. The team numbers over 80 investment professionals, including 17 operations executives. They are based in Beijing, Hong Kong, New York and recent additions Shanghai and Shenzhen.

Fund IV will focus on healthcare, consumer and internet, technology and industrial, and software and enterprise services. This represents a broader remit than Fund III, which largely focused on healthcare, consumer, and technology opportunities.

Since September 2020, CPE has invested RMB3.34 billion in Xuzhou Construction Machinery, led a round for Kunlun, Baidu's semiconductor unit, at a RMB13 billion valuation, and joined a funding round for Oatly, a Swedish oat milk brand. Last year, Oatly secured $200 million from a consortium led by The Blackstone Group at a $2 billion valuation.

Of the four IPOs, 17 Education & Technology listed on NASDAQ, while Liferiver Biotech went to Shanghai's Star Market, and JD Health and MicroPort CardioFlow Medtech (MCM) both went to the Hong Kong Stock Exchange. CPE is sitting on a 6.25x unrealized gain on JD Health, having joined a $1 billion round at a $7 billion valuation in 2019.

MCM is part of a multifaceted relationship between its parent, Hong Kong-listed medical equipment manufacturer MicroPort Medical, and CPE. The private equity firm participated in a private placement for MicroPort Medical in 2019 and then backed three spinouts: MicroPort Endovascular MedTech (Endovastec), MicroPort EP MedTech, and MCM.

"We had been following MicroPort for a long time on the secondary market. When it applied for a Star Market IPO for Endovastec in 2019, we realized there would be more spinoffs. Endovastec's successful IPO provided a clear exit channel. This was a critical point for us in deciding to back the group's other spinoffs," Chen Chen, a principal at CPE, told AVCJ in February.

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• Topics
• Greater China
• Fundraising
• Buyout
• GPs
• China
• Citic Private Equity