NY Fund, AsiaInfo Investments Raise Citic’s Global Profile

Citic Capital invests in New York startup fund

The growing field of big Chinese global investors has gained a new member, with word that a unit of Citic Group, one of the nation’s oldest conglomerates, is taking a stake in a major new fund being set up in New York. Word of that deal comes as Citic Capital wraps up another major deal, as it finally closes its long and difficult plan to buy out New York-listed telecoms software maker AsiaInfo-Linkage (Nasdaq: ASIA). Both deals underscore not only Citic’s own aspirations as a global investor, but also the broader rise of Chinese private equity firms on the world stage as they aim to compete with big western names like KKR and Carlyle.

Let’s begin with the latest news that says Citic Capital reportedly will invest in a new fund being set up in New York by former executives of bankrupt hedge fund FX Concepts. (English article) Citic Capital has been in talks for nearly a year to invest in the fund, which will be managed by 2 of FX Concepts’ former top executives. FX previously managed a currency fund that was once one of the world’s largest with $14 billion in assets. But the fund began to founder last year and declared bankruptcy in October.

A report on the new tie-up didn’t specify how much Citic Capital would invest, or what exactly the new fund will do. Given the background of the fund’s managers and the size of Citic Capital’s total assets, which total about $4 billion, I would expect the new fund will probably be another hedge fund and that Citic’s investment could be around $300-$500 million. I don’t know enough about the new venture’s partners to comment on chances of success for the fund, but would say the investment looks like a relatively shrewd one if it takes the form I’ve described above.

Word of this new investment comes on the same day we’re hearing that Citic Capital has finally closed its painfully slow buyout of AsiaInfo-Linkage. (company announcement) Citic Capital led a group that first expressed interest in this buy-out 2 years ago. The final deal values AsiaInfo at around $900 million, and I would expect that Citic Capital probably contributed about a third of that, making its investment around $300 million.

I won’t write more about the deal here, as I’ve written far too much about it already due to its numerous twists and turns as rumors swirled of insider dealing. AsiaInfo is one of China’s oldest US-listed firms, but saw its shares neglected in recent years amid a broader loss of interest in Chinese tech firms by foreign investors. Following closure of the buy-out, AsiaInfo said it has applied to the Nasdaq to have its shares de-listed, and I expect we could see the stock disappear by the end of this month.

From a broader perspective, Citic Capital’s AsiaInfo buyout and participation in this new New York fund represent the company’s growing aspirations as a global investor. The company is just one of several such investors to emerge from China in recent years. Other big names in the emerging field include HNA Group, Fosun International (HKEx: 656) and Hony Capital, whose sister companies include PC giant Lenovo (HKEx: 992).

Fosun was in the news earlier this week after being chosen to buy a stake in Portugal’s biggest insurer (previous post), and is also part of a management-led buy-out for French resort operator Club Med (Paris: CU). Media are also reporting this week that Hony is examining a bid for British food giant United Biscuits. Most of the Chinese investors are shrewdly making their moves with more experienced western partners, giving them a fairly strong chance for success as they seek to become more global.

Bottom line: Citic Capital’s investment in a new New York fund and its lead role in the buyout of AsiaInfo mark its rise as a major global investor, part of a broader move by Chinese private equity.

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