China's Hony eyes manufacturing, healthcare opportunities
China-focused PE firm Hony Capital is tracking investment opportunities in state-owned manufacturing and healthcare companies as the government seeks to further restructure its assets.
Hony has invested in 31 state-owned enterprises (SOEs), commiting around RMB14 billion ($2.3 billion), over the past decade. The total value of those companies has more than doubled on average, John Zhao, the PE firm's founder and CEO, told Reuters.
The National People's Congress said last month that it would "encourage non-public business" to invest in state businesses, and Hony sees this as an opening for onshore and offshore private equity funds.
Its most recent SOE investments came in January, when Chinese regulators approved the acquisition of a 10% stake in property and waste-treatment solutions developer Shanghai Chengtou Holding for RMB1.8 billion. The deal was first announced in April last year.
"There's a consensus [among state company managers, government regulators and investors] that market-driven is much better than state control for competitive industries," Zhao said in the interview.
Meanwhile, China's healthcare reforms have given impetus to PE firms looking at the sector, notably service providers. The government's decision to relax curbs on foreign investment in state-owned hospitals is seen as indicative of a more favorable environment.
Hony oversees approximately $7 billion of assets under management. It closed its fifth US dollar-denominated fund at $2.35 billion in early 2012 in addition to raising RMB10 billion ($1.6 billion) for its second renminbi vehicle. Zhao told AVCJ in September that the two funds were 30% and 65% deployed, respectively.
The private equity firm focuses on the consumer, advanced manufacturing, healthcare and services and energy sectors, as well as cross-border investments.
Hony is currently participating in the privatization of US-listed Chinese online game developer Giant Interactive. The deal values the company at approximately $2.9 billion and the ultimate aim is to re-list it.
Recent cross-border deals include supporting a Chinese-owned oil and gas exploration company that wants to acquire energy assets in Western Canada and backing a start-up Hollywood movie studio.
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