Bohai Industry Investment Fund, China's first locally-invested private equity (PE) fund, announced Friday it has invested 1.5 billion yuan (200 million U.S. dollars) in a state-owned steel pipe producer in the northern city of Tianjin.
The investment, made in the Tianjin Pipe (Group) Corporation, was the fund's first transaction since it was established upon approval by the State Council in December 2005, at the Binhai District of Tianjin, which is spearheading China's financial reform.
"It (the investment) will help the firm ease long-term dependence on bank loans, standardize its financial network, and upgrade its capital structure," said Meng Hao, director for the international finance center at the Tianjin University of Finance and Economics.
The steel pipe producer, also based in Binhai, is China's largest seamless steel pipe producer, with its products exported to 72 countries and regions. It plans to go public in the first half of next year.
Ou Wei, president of the fund management company, said: "The transaction marks the beginning of stronger alliances between Chinese PE funds with industry leaders."
He refused to reveal the amount of equity he gets in the company.
PE fund, a major investment channel along with bank loans and IPOs,is mainly for companies with high growth potentials before they are listed in stocks. Statistics show global PE funds have accumulated to about 738 billion U.S. dollars.
In China, the fast-lane development of businesses has led to high demands for the funds.
A study patronized by three organizations including Xiamen University, shows international PE investors, including the world's top four -- Black Rock, Carley Group, KKR, and Texas Pacific Group -- were involved in 129 cases of investment in the Chinese mainland by the end of last year, with a total value of 12.97 billion U.S. dollars.
"Although Chinese PE funds started out late than international competitors, we kicked off on a good start, and it's actually taking off," said Ma Jun, general manager of the fund.
"As a 'local' fund, it breaks free of limitations set for foreign investors, and more importantly, it doesn't arouse concerns over the State industry safety," he added.
Bohai Industry Investment Fund, with a planned size of 20 billion yuan, raised six billion yuan at the first phase in last December. Its major sponsors include the National Council for Social Security Fund of China, BOC International (China) Limited, TEDA International Holding Co., Ltd., the Postal Savings Bank of China, China Life Insurance Company and Tianjin-based Jinneng Investment Share-holding Co., Ltd.
(Xinhua News Agency November 3, 2007)
