Bottom line: Citic Capital and Fosun are expanding their tastes beyond the traditional Chinese preference for distressed assets, reflecting growing sophistication and diverging strategies of China’s emerging private equity buyers.
Chinese private equity is in a few major headlines this week, picking up assets in the technology, insurance and retail sectors in the US and Japan. The wide range of deals and geographies reflects the diverging strategies of some of China’s emerging private equity giants, which are rapidly developing their own individual personalities on the global stage. Citic Capital is behind 2 of the latest deals, picking up a retail asset in Japan and a US company that specializes in imaging technology. Meantime, Fosun International (HKEx: 656) has made a major new purchase in the US, offering to buy the remaining stake in an insurer that it first invested in last year.
Collectively these 3 deals are quite large, representing more than $4 billion in value. Such amounts would have been unthinkable just 2 or 3 years ago, when most Chinese global M&A was limited to big state-run firms buying mostly energy and resource assets as part of Beijing’s effort to feed China’s booming economy. Nowadays companies like Fosun, Citic Capital and HNA Group have emerged as a new generation of major global investors who make their own decisions independently of Beijing.
Let’s start with Citic Capital, which is the private equity arm of Citic Group, one of China’s oldest financial conglomerates that is technically state-owned but acts more commercially than most other big state-run firms. The bigger of its 2 deals has Citic Group joining a consortium that is buying imaging sensor maker OmniVision (Nasdaq: OVTI) in a deal valued at $1.9 billion. (English article)
This plan was first disclosed last year, but only now has a deal finally been signed. It will see OmniVision’s Nasdaq-listed shares purchased for $29.75 each by a group that includes Citic Capital, Hua Capital and Goldstone Investment. (company announcement) OmniVision is one of the world’s leading makers of camera sensors for smartphones, but has been relatively unappreciated by investors. The company’s stock now trades at about double the level from its 2000 IPO, but is still well below several peaks reached since then.
Meantime, Citic Capital says it has also just closed its purchase of Japanese apparel company Mark Styler Co. (English article) The Japanese clothing designer and retailer owns a number of brands, including Emoda, Dazzlin and Murua, and has a network of more than 170 stores.
No financial terms were given, but a company of that scale would most likely fetch at least $100 million and possibly quite a bit more, depending on how profitable it is. Citic Capital is hoping to use its connections to help the company expand in China, though it could face a difficult time in an apparel market where many of the world’s top retailers are already well represented.
Last there’s Fosun, which is rapidly emerging as one of China’s most aggressive private equity firms after making a number of major global acquisitions over the last 2 years, including its purchase of the landmark One Chase Manhattan Plaza in New York and French resort operator Club Med. The company is once again in the headlines this week, saying it will pay at least $1.84 billion for 80 percent of US specialty insurance company Ironshore. (English article) Fosun previously bought 20 percent of Ironshore last year for $464 million, valuing the entire company at about $2.3 billion.
Fosun’s aggressive Chairman Guo Guangchang said the Ironsource buy is just part of his plan to spend $2.4 billion to buy 5 insurers in the US, Europe and Asia this year. The company already owns a leading Portuguese insurer as part of a major acquisition last year, reflecting Guo’s bullishness on the sector. (previous post) We should expect to hear more acquisition news this year from Fosun, Citic Capital and perhaps one or 2 other emerging Chinese private equity firms, with developed markets shaping up as one of their favorite shopping destinations.