China private equity firm Hony Capital will back China-based companies looking to acquire non-domestic assets by teaming up with domestic partners. According to Hony founder, John Zhao, there are opportunities in overseas developed markets where asset prices have come down significantly making the second half of 2013 a good time to invest.
Hony Capital, China’s largest private equity firm by assets, is looking to team up with domestic partners to make offshore acquisitions as the global economic slowdown brings down asset prices and serves up investment opportunities. About four years ago, Hony moved into cross-border investments.
John Zhao, founder and chief executive of the fund which manages over $7bn in assets, said the combined value of the firm’s domestic and offshore deals this year should at least match last year’s total of more than 10 billion yuan ($1.6bn).
While the home-grown Chinese investment firm has been focused mainly on the domestic market since it was founded in 2003, Hony is currently looking to ramp up overseas investments, especially in developed markets where asset prices have come down significantly amid a downturn.
“It could be a good time to make deals, especially for mergers and acquisitions,” Zhao told Dow Jones Newswires in an interview.
“More and more Chinese firms we’ve invested in are envisioning themselves as global companies. Some of them are starting to acquire mature technologies and brands. We will continue to finance them and team up with them to venture into the global market,” he said.
Sponsored by Chinese conglomerate Legend Holdings Ltd., Hony started out as a manager of U.S. dollar funds focusing on investing in domestic state-run firms in construction, healthcare, finance, retail, media and renewable energy. It has invested in about 70 firms, including Changsha Zoomlion Heavy Industry Science & Technology Development Co., China Glass Holdings Ltd. and Simcere Pharmaceutical Group.
According to the company’s website, it holds stakes in foreign companies including Japanese property investment firm Tokai Kanko Co., Italian machinery maker Compagnia Italiana Forme Acciaio SpA and Singapore-listed Biosensors International Group Ltd., which is engaged in cardio-technology.
In December of last year, Hony more than doubled its assets under management by raising $4bn for two new funds–a $2.37bn fund and a 10 billion yuan fund. Zhao said cross-border investment is the focus of the dollar fund.
“The downturn might continue for a while. But I’m confident that China can maintain strong growth over the long run,” he Zhao said.
