Companies

Carlyle's presence to increase

By Hu Yuanyuan and Cai Xiao (China Daily)
Updated: 2011-05-17 13:08

The PE fund has so far spent $3 billion on around 50 investments

BEIJING - Carlyle Group, one of the world's largest private equity firms, has just closed a second round of fundraising for its Beijing yuan-denominated fund, which now totals 3.2 billion yuan ($492 million). The company plans to use the fund to complete a deal with a company in the communications industry, David Rubenstein, Carlyle co-founder and managing director, said on Monday.

"We've signed a deal with a company from the TMT (technology, media, telecom) industry," Rubenstein told China Daily, when attending the Carlyle CEO forum in Beijing.

He declined to disclose the name of the company or the scale of the investment.

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The deal marks Carlyle's first use of its renminbi fund.

Carlyle now runs two yuan-denominated funds in Asia: A $100 million joint-venture fund with Fosun Group, a private conglomerate in Shanghai, and a fund in Beijing that the company hopes will eventually total 5 billion yuan. The firm also runs three dollar-denominated funds in Asia.

According to Rubenstein, Carlyle is particularly interested in China's financial, food and health-care industries, largely because the country's middle class is becoming increasingly wealthy and is increasing its demands for the luxury products.

"We'll focus on companies applying to the domestic market instead of export-oriented ones," Rubenstein said.

The Chinese government plans to reduce the country's dependence on exports and capital-intensive industries, and to encourage more domestic consumption.

So far, Carlyle has spent more than $3 billion on approximately 50 investments in China.

The average percentage returns the company has seen on its investments in China have been higher than the average 30-percent it has made on its investments throughout the world, he said.

Recently, Carlyle has drawn criticism after two of the companies in which it had invested - the Hong Kong-listed China Forestry Holdings Inc and the Nasdaq-listed fertilizer maker China Agritech Inc - were suspended from trade. Rubenstein said neither suspension has been a catastrophe.

"Investment cannot be perfect, and the investigation is still ongoing," Rubenstein said, adding that more than 95 percent of Carlyle's deals are successful and its investment in the companies is small when compared with Carlyle's total investments in China.

According to Rubenstein, Carlyle is looking to make investments in China's western regions.

He also said Carlyle is the first private equity company to set up a branch in Chengdu.

"China's (private equity) penetration ratio is still low compared with the US, and most of the investments so far have been made in the eastern region," Rubenstein said.

"So there are more opportunities in the western region."

To mop up market liquidity, banks have tightened the reins on their lending this year, stoking concerns that a lessened ability to take on debt will hinder some in the private-equity business.

However, Carlyle's business will not be affected, since the company has borrowed little in China, according to Rubenstein.

"We intend to do more leverage deals in developed markets," he said.