China Development Bank Corp.’s investment unit agreed to purchase a stake in U.S. buyout firm TPG Capital, said a person with knowledge of the matter.
TPG co-founder Jim Coulter attended a signing ceremony in Beijing today with China Development Bank Capital Co., according to a copy of the schedule for the event seen by Bloomberg News. Michael Fuchs, an external spokesman for TPG, and Zhang Cheng, vice president of the strategic planning department for CDB Capital, declined to comment.
China is stepping up efforts to develop its private equity industry as firms including Morgan Stanley raise yuan funds for local investments. China Development Bank has been run since 1998 by 66-year-old Chen Yuan and is the country’s only lender to win a license from the cabinet to set up a private equity unit. CDB Capital’s funds include the $1 billion China-Africa Development Fund.
“CDB’s strong client base and government backing may help TPG get more mega deals in China,” said Sheng Nan, a Shanghai-based analyst at UOB Kayhian Investment Co. “On the other hand, it’s a quick way for CDB to benefit from a diversified overseas portfolio.”
China Development Bank, a state policy lender set up in 1994, had more than 5 trillion yuan ($770 billion) of assets at the end of December. CDB Capital was established in August 2009 with 35 billion yuan of registered capital to focus on private equity, direct corporate investment and advisory services.
Separately, the unit said today it will buy 1.92 billion shares of New Capital International Investment Ltd. for HK$768 million.
Singapore, Kuwait Stakes
TPG and rivals Blackstone Group LP and Carlyle Group are selling stakes in their management companies to raise capital for expanding beyond buyouts as private-equity fundraising remains at an eight-year low. China Development Bank has sought regulatory approval to buy a minority stake in TPG, the Financial Times reported earlier today, citing people it didn’t identify.
TPG sold a stake to Government of Singapore Investment Corp. and the Kuwait Investment Authority, a person briefed on the decision said last month. The Fort Worth, Texas-based firm plans to use proceeds to finance expansion of new and existing lines of business and into emerging markets, according to the person.
China Investment Corp., the nation’s $300 billion sovereign wealth fund, owns a stake in Blackstone and New York-based Morgan Stanley after it began investing in the U.S. as the credit crunch took hold in 2007.
World’s Largest Buyout
TPG’s global investments include Energy Future Holdings Corp., the Texas power producer whose $43.2 billion leveraged buyout in 2007 was the largest in history.
The buyout firm, which manages about $48 billion, has invested $8.1 billion in Asia since the start of 2008, more than Carlyle and KKR & Co., according to the Asian Venture Capital Journal.
More recently, TPG paid $3 billion to acquire J. Crew Group Inc., the retailer it first bought in 1997 and then took public in 2006. TPG, most of whose top executives are in San Francisco, also owns broadcaster Univision Communications Inc. and casino giant Caesars Entertainment Corp.
The largest private-equity firms increasingly are looking beyond buyouts for fees and profits. At Blackstone, the fund of hedge funds business is now the firm’s largest by assets. KKR recently hired a partner to oversee real estate investments and plans to start its first long-short hedge fund later this year.