PAG's Hong Kong IPO on hold amid weak market

Poor capital market conditions, PAG’s heavy exposure to a bearish Chinese economy, as well as a lukewarm appetite for the firm’s fourth flagship fund, which is currently in the market, have all contributed to the delayed offering, the sources noted.

A PAG spokesperson denied the IPO plan has been put on hold, noting that the timing is determined by underwriters based on market conditions: “We are certainly not delaying anything. Globally, the IPO market has basically dried up – down more than 90% from the same time last year in Europe and the US and about the same in Hong Kong – because all these markets are in bear territory.”

The spokesperson added that the fundraise is proceeding as planned. “We only started accepting investors for this fund at the end of the first quarter,” they said. “While China is a concern for some investors, LPs are impressed that our China portfolio is performing well due to our value-oriented and diversified strategy which has proved to be resilient even in a down cycle."

PAG is targeting USD 9bn for its fourth pan-regional buyout fund, up from USD 6.05bn in the previous vintage. As of December 2021, Fund III had generated a gross multiple of 1.24x and a gross IRR of 19%. This compares to 2.87x and 19.5% for Fund I (USD 2.5bn, 2012) and 2.64x and 25.3% for Fund II (USD 3.66bn, 2015). The firm has also raised two growth funds of USD 350m and USD 525m.

Hong Kong has seen a dearth of IPOs so far this year. A total of USD 1.79bn has been raised across 19 offerings year-to-date versus USD 17.25bn for 37 IPOs in the same period last year, according to Dealogic data. Several other sizeable listings have been pulled. These include insurer FWD Group, which postponed its USD 1bn IPO in May due to weak market conditions, Mergermarket reported.

PAG’s filing in March represented the first attempt by a private equity firm to list on the Hong Kong exchange. Bloomberg reported that the offering could be as large as USD 2bn, while the target market capitalisation was USD 10bn-USD 15bn.

As per rules issued by Hong Kong Exchanges & Clearing (HKEx), PAG’s listing application remains valid until the end of June 2022, after which the private equity firm would be required to renew its application. There is currently no concrete timetable for the offering, the first source said.

The first two sources and a fourth source familiar with the situation cited PAG’s heavy exposure to China as a concern for IPO investors. As of December 2021, 52% of the invested capital in PAG’s closed-end funds was deployed in Greater China, the IPO prospectus stated. The World Bank expects real GDP growth in China to slow to 4.3% this year, below the official target of around 5.5%.

Private equity is the second-largest and the best-performing of PAG’s three major strategies. It accounted for USD 16.9bn in assets under management (AUM) – of which USD 9.5bn was fee-paying – as of year-end 2021 and has delivered a gross return of 26% since inception. This compares to USD 20.9bn and 20% for credit and USD 9bn and 25% for real assets.

PAG’s buyout funds have deployed more than USD 10bn across 45 investments to date, realising USD 6bn.

Last year, USD 2.37bn was put to work, comfortably eclipsing the previous record high of USD 1.51bn set in 2017. Deals included PAG's largest to date: a USD 2.8bn contribution to a USD 6bn round raised by Chinese shopping mall operator Wanda Commercial Management Group.

The firm was also active outside China. Investment in Asia ex-China came to USD 1.19bn, more than the previous four years combined

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• Topics
• Greater China
• IPO
• GPs
• Hong Kong (China)
• PAG
• Asia