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Belgian, Chinese sovereign funds launch growth fund

by Jonathan Braude | Published May 2, 2012 at 12:01 PM

The Belgian and Chinese sovereign wealth funds on Wednesday, May 2, became the founding investors in a private equity growth fund aimed at backing European companies with expansion plans for China.

In a signing ceremony attended by Chinese Vice Premier Li Keqiang and Belgian Prime Minister Elio di Rupo, China Investment Corp. and Belgium's Federal Holding and Investment Co., SPIF/FPIM, announced investments in A Capital China Outbound, a Luxembourg growth capital fund with a soft target of €250 million ($329 million) and a hard cap of €500 million.

The exact size of their commitments was not disclosed. But between them, the two funds have committed a sum large enough to provide a first close of the fund. The money will flow through their joint feeder vehicle, China Belgium Mirror Fund.

A Capital Asia, the private equity firm behind private Chinese conglomerate Fosun International Ltd.'s 2010 investment in French holiday company Club Méditerranée SA, plans to target performing European midcaps with revenues of more than €100 million and strong growth potential in China. It will invest itself and bring in Chinese private or state-owned companies as co-investors in any deal.

"European companies need to be in China, not just to produce goods, but also to market and sell products to Chinese customers," A Capital Asia chairman André Loesekrug-Pietri said.

Loesekrug-Pietri said European firms that might not otherwise have been interested in taking on a private equity investor knew that they needed expert help in going into China and in finding the Chinese partner essential in making their business a success. "We have the capacity to engage in discussions with the management of European companies, because we can bring them a strategic solution to their China dilemma."

Having CIC on board would obviously help to show the strength of the private equity firm's China connection, he said, and would open doors in Europe. But other private or state companies would likely be the main industrial co-investors for future deals.

Loesekrug-Pietri said A Capital had not previously raised a fund, but had done the deal to bring in Fosun as 7.1% investor in Club Méd and then co-invested with Fosun for a smaller stake. On the strength of that deal it had been able to go out and start raising a fund. It hopes to attract family offices and other European limited partners to its fund in the months to come.

As for future investments, the firm would be looking to European companies with revenues between €100 million and €300 million and was seeking deals in the automotive and environmental sector. The likely Chinese co-investors in such a deal would be an auto company or parts manufacturer and, in the environmental sector, probably a utility company.

Loesekrug-Pietri said A Capital Asia, which has offices in Beijing, Shanghai, Paris and Brussels, did not use a placement agent for its deal with the sovereign wealth funds, but had counsel from Thibaut Partsch and Laurent Donnay de Casteau of Loyens & Loeff NV. CIC took counsel from Tony Gibson of SJ Berwin LLP.

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