China’s CIC tops overseas investment deals – study
China’s sovereign wealth fund, the China Investment Corporation (CIC), was the most active investor for overseas direct investment (ODI) in 2012, according to an index published A Capital, a private equity firm focused on cross-border transactions involving Chinese companies.
Chinese's total outbound investment increased 14% to $77.2 billion last year. The projection is based on A Capital's Dragon Index, a tool launched by the firm to monitor the growth of ODI stock relative to GDP. Investments into Europe are expected to remain strong due to moderate valuations, the absence of regulatory hurdles and the strategic match between sectors of interest, in particular in urbanization-linked sectors.
The top ten investors ranked by index also include state-owned enterprises (SOEs) Weichai Power, China Petrochemical, Bright Food, Sinopec, State Grid, China Three Gorges and private firms Lenovo, Huawei Technologies and Dailan Wanda.
Europe, the top destination for Chinese investment last year, has received $12.66 billion in investment from Chinese companies. Significant deals included Bright Food acquiring 60% of cereal maker Weetabix, CIC's acquisition of a 10% in London's Heathrow Airport and 9% in UK Thames Water Utilities.
State-owned enterprises dominate, accounting for 86% of outbound M&A activity by value last year, up 47% from 2011. "SOEs are expected to remain a large driver for outbound investment measured in terms of value as they have larger resources available and receive a strong mandate from the government to close overseas deals," André Loesekrug-Pietri, Chairman and Managing Partner of A-Capital, told AVCJ.
Even though private equity firms accounted for only 14% of the deal value, they represent 40% of the number of transactions. "This means the willingness of private firms is strong and that they have the capacity to close deals in every competitive environment," he added.
The firm expects Chinese overseas investment to grow from the current $80 billion to around $150 billion per year. The outflow from China is expected to grow continuously in the years to come, reaching around $800 billion by 2016-2017.
In May last year, A Capital launched a small fund to help domestic companies make investments in Europe in partnership with the Belgian Federal Holding Company and CIC. The China-Belgium Mirror Fund will take minority stakes alongside Chinese firms in mid-sized European companies with strong potential in China. It is the first mirror fund that China has set up in the eurozone.
The fund has a target size of EUR250 million, but may reach EUR500 million in the wake of strong interest from investors. A Capital is expecting to announce a second closing in the coming months, Loesekrug-Pietri said.
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