FUND RAISING: Citic Funds Uber, Lufax Eyes IPO

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Bottom line: New fund-raising signals indicate car services giant Uber could spin off its China unit within a year, and that Ping An-backed P2P lending platform Lufax could make a major IPO in the same time frame.

Uber, Lufax send new fund-raising signals

Two big new fund-raising stories are in the headlines, led by a modest new funding commitment that hints at a spin-off soon for the China unit of hired car services leader Uber. Meantime, the rush to see which of China’s fast-growing peer-to-peer (P2P) lending sites will be first to market has officially begun, with separate reports saying an IPO is in the planning stages for Lufax, a Shanghai based company that is backed by one of China’s top traditional financial services firms.

Both of these deals are in the mid-range in terms of size, probably worth the $100-$500 million, contrasting with a spate of deals earlier this year that were worth much more when China’s stock market was booming. It’s still possible we could see one or two more mega-fundings worth $1 billion or more by the end of the year, though such large deals could quickly disappear if China’s stock markets and economy remain in the doldrums.

Let’s begin our round-up with Uber, which has become a fixture in the headlines for its recent spate of fund-raising activity. At this point Uber seems to be actively seeking out well-connected strategic local partners to back its China unit, following its recent disclosure that it may split off the unit into a separate company due to the market’s size and complexity.

Against that backdrop, Uber’s latest talks for a $100 million investment from financial services giant Citic looks like a highly strategic move. (English article; Chinese article) The actual investment would come from Citic-CP Asset Management, a joint venture between 2 Citic units, Citic Trust and Citic-Prudential Fund Management. The reports say 80 percent of the investment would go into Uber itself, while the other 20 percent would go into Uber’s China unit.

This particular investment would be relatively small for Uber, which lately has become used to raising $1 billion or more in its funding rounds. The company has been quite aggressive in China, saying earlier it planned to spend $1 billion to expand in the market this year alone. (previous post) To ensure its position, the company has been quietly building up a stable of major well-connected Chinese partners.

Seeking Well-Connected Partners

Citic would certainly fit that description, as the company is one of China’s oldest financial conglomerates and has very good ties with Beijing officialdom. One of Uber’s other major China partners is leading online search engine Baidu (Nasdaq: BIDU), and earlier this year the company was also reportedly in talks for separate tie-ups with China-focused fund manager Hillhouse Capital and smartphone maker Xiaomi. This latest investment seems to indicate that Uber is moving ahead quickly with its China spin-off plan, and could execute such a move within the next 12 months.

Next there’s the Lufax IPO plan, which was revealed by its largest stakeholder Ping An Insurance (HKEx: 2318; Shanghai: 601318). Ping An CFO Jason Yao revealed the plan in response to a reporter’s question at an unrelated event, saying Lufax is “actively considering” an IPO to boost its own value. The company previously said it was worth nearly $10 billion after it raised $485 million in a funding round in April. (previous post)

P2P lending has become a hot area in China’s financial services sector, as private companies have rushed to fill a niche of lending to smaller, private businesses that are often overlooked by traditional state-run lenders. But P2P has also been filled with fraud and other problems due to lack of regulation. In this case Lufax certainly looks like one of the better bets for longer term success due to its Ping An ties, and these latest remarks hint that an IPO worth $500 million or more could come within the next 12 months.

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