Lehman, Lee & Xu - China Private Funds in the news

The China Law News keeps you on top of business, economic and political events in the China.
Blawg | Newsletter Archive

In the News

China expected to have investments in Africa private equity funds

NAIROBI, Nov. 28 (Xinhua) -- China is seen as a latecomer in investing in Africa through the private equity funds, a strategy successfully used by sovereign wealth funds of countries like France and Germany that enables them to benefit from diversified investment returns in the continent.

Managing Director of Institutional Fundraising at the Citadel Capital Stephen Murphy said it is time Chinese investors dipped their money in private equity funds in Africa to give them additional investment leverage in private sector in addition to the public sector contracts. "Investing in regional private equity funds will help the Chinese have a wider coverage of opportunities in the continent and generate more profits from the continent's high returns," said Murphy in Nairobi on Monday.

Citadel Capital with investments of 8.6 billion U.S. dollars under control is ranked the No. 1 private equity firm in Africa. It is ranked No. 93 in the world. "So far, more interest to invest in private equity funds in Africa is coming from the European Union. That way, these investors are able to take advantage of wider opportunities in the continent," he said.

The most popular active EU funds investing in Africa's private equity funds include PROPARCO, the subsidiary of the French Development Agency that finances the private sector, FMO, the entrepreneurial development bank of the Netherlands and the KfW Bankengruppe, German-based development finance institution that provides long-term project and company financing.

He said institutions like the China Investment Corporation (CIC) , a sovereign wealth fund and China Africa Development Fund, an eventual 5 billion dollar fund to encourage and support Chinese enterprises to invest in Africa should take opportunities to invest in Africa's private equity funds.

Citadel Capital is expected to start talks with CIC next month with possibility of the fund investing in into the African private equity.

A report by global consultancy firm Ernest & Young, "Global private equity watch: Winners will emerge" names Africa alongside Poland and Turkey as garnering growing interest from private equity investors. "These markets are home to a significant number of successful family-owned and other growth-oriented companies, and also expect to see a rise in privatizations of state-owned enterprises," notes the report.

An earlier report by the same company forecast that an increase private equity exit activity in Europe and North America in 2010 will most likely benefit Africa from this year going forward. It said the natural choice or existing private equity funds was in Africa because of higher returns and wide opportunities.

Citadel Capital has invested in mining, rail and water transport, agriculture, solid water management among other businesses in 15 African countries.

Web link: http://news.xinhuanet.com/english2010/indepth/2011-11/29/c_131275327.htm


China XLX raises funds from Primavera

Primavera Capital, a private equity (PE) fund co-founded by ex-Goldman Sachs Greater China head Fred Hu, has agreed to subscribe to the convertible bonds issued by China XLX Fertiliser to provide funds for the company’s capital expenditures.

The Henan-based fertilizer producer raises a total of 324 million renminbi (USD51 million) from the issuance of convertible bonds to Nitro Capital, a subsidiary of the China-based PE fund. The funds will be used to finance the expansion of its fourth urea plant in Xinjiang province, acquisition of coal resources and general working capital.

The five-year renminbi-denominated convertible bonds carrying an annual coupon rate of 4.5 percent will be issued at face value. Conversion price of the bond is fixed at 1.84 renminbi per share, representing a premium of 13 percent over the volume weighted average price of the company’s shares traded on the Singapore Stock Exchange and the Hong Kong Stock Exchange for 20 trading days prior to the agreement. Primavera is not allowed to convert or sell the convertible bonds within a lockup period of six months.

Upon full conversion at the initial conversion price, the bonds will be converted into 176 million shares or 14.9 percent of the enlarged share capital of the company. Primavera will become the third largest shareholder and largest institutional investor upon full conversion. The convertible bonds are arranged by DBS.

Primavera Capital is a leading international PE fund based in China. Lian Jie, a partner of Primavera and a former managing director at Goldman Sach’s investment banking division, will be appointed as a non-executive director of the fertilizer producer’s board.

The company has the right to defer interest payment to the fund, but will be charged an additional two percent of interest per annum. The two parties have also agreed on terms of cash pay rate of up to an additional 16 percent annually in the event of step up occurrence, step up event or step up action.

China XLX intends to engage a long-term strategic investor to help further improve its corporate governance as well as its shareholder base. The PE fund could also help the company to explore more expansion opportunities, the company says.

Web link: http://www.theasset.com/article/20830.html


Lehman, Lee & Xu is a top-tier Chinese law firm specializing in corporate, commercial, intellectual property, and labor and employment matters. For further information on any issue discussed in this edition of China IP In The News or for all other enquiries, please e-mail us at mail@lehmanlaw.com or visit our website at www.lehmanlaw.com.

© Lehman, Lee & Xu 2011.
This document has been created for educational purposes for clients, potential clients and referrers of services to Lehman, Lee & Xu, and to alert readers to the services provided by Lehman, Lee & Xu. It is not intended to serve as definitive professional or legal advice, and should not be relied upon as such. Lehman, Lee & Xu does not endorse any personal opinions which may be contained herein.
We hope that you enjoy China Labor Insights. If you would like us to send you new issues by e-mail each month, please click here to subscribe. There is no charge for this service. If not, please click here to unsubscribe.