CITIC Capital targets $1.5b for China fund

The GP is looking to raise a $1.2 billion US dollar-denominated portion and a further $300 million in renminbi, according to a source familiar with the situation. This dual-tranche approach leverages measures in special economic zones - such as those in Shenzhen and Shanghai - that allow managers to invest the two currencies simultaneously by removing certain convertibility and foreign investment restrictions.

CITIC Capital Holdings, which is majority-controlled by CITIC Group and China Investment Corporation, has $5 billion in capital across private equity, real estate, mezzanine finance, asset management and venture capital. The private equity business accounts for almost half of this capital pool, with operations in China, Japan and the US. A third Japan-focused fund is in the process of being raised.

CITIC's most recent China fund closed at $925 million in early 2010. It primarily pursues control deals, specializing in manufacturing; food; consumer; healthcare; and technology, media and telecom (TMT). Investments include take-privates of AsiaInfo-Linkage and Focus Media - which has since re-listed in Shenzhen - and acquisitions of test preparation business Study & Share Education and mattress maker King Koil Shanghai Sleep System.

The firm's third international fund closed at $562 million in 2011. Its typical approach has been to identify assets with underexploited China angles and then team up with a US-based GP to make the acquisitions. Most are sold to multinationals keen to boost their China exposure, although the last two exits - Stackpole International and Henniges Automotive Holdings - went to Chinese buyers.

Another source described the decision to combine the China and international teams and raise a single fund as a logical response to China's growth. Whereas traditionally cross-border deals involved industrial assets, now the scope of Chinese interest is much broader, taking in each of the verticals that the China team already targets.

"It makes sense for the international team to get up the learning curve in all of these industries, so it makes sense to combine the teams," the source added. "Also, increasingly you see opportunities where the line between international and China is blurring. CITIC is uniquely positioned to address these opportunities."

Several China-focused GPs are looking to raise funds of $1 billion and above. Hony Capital - which is also taking the dual-tranche approach - is targeting $2 billion for its latest fund, plus a cross-border side vehicle of $600 million. Trustbridge Partners and Primavera Capital have both been in the market for some time, with the latter said to be nearing a final close, while CMC Capital Partners wants to raise around $1 billion across two vehicles, one US dollar-denominated and the other in renminbi.

In addition, it emerged last week that Warburg Pincus would seek $2 billion for a China-dedicated vehicle to invest alongside its flagship global fund.

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• Topics
• Greater China
• Fundraising
• Buyout
• CITIC Capital
• Renminbi
• China