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 With a recession cramping the spendthrift habits of American consumers, U.S. retailers aren't seeing a huge amount of interest from private equity firms, but that's not the case in China, where buyout shops are busy grabbing minority stakes in retailers within the world's most populous country. Bain Capital LLC is reportedly close to making a $400 million investment in one of China's largest retailers, Shanghai-based Gome Electrical Appliances Holding Ltd. (The Deal Pipeline subscribers can see the story here.) The deal would give the Boston LBO shop a minority stake of less than 20% in Gome, but more importantly it could help stabilize the company after the arrest of Gome's founder Huang Guangyu last November sent the stock into a tailspin. Shares of Gome fell 70% and are currently suspended from trading on the Hong Kong exchange. Meanwhile New York buyout shop Warburg Pincus -- already a stakeholder in Gome -- could be preparing to exit its three-year-old investment in China's largest appliances retailer. Warburg Pincus holds a minority stake in the company as well as convertible bonds and is represented on the board by Warburg Pincus Asia managing director Sun Qiang Chang. In May TPG Capital invested $132 million in Chinese footwear retailer Daphne International Holdings Ltd. in the form of convertible bonds with warrants that could give it a stake as high as 14.5%. (The Deal Pipeline subscribers can see the story here.) As part of the deal, TPG managing director Mary Ma, a former CFO of Chinese computer maker Lenovo Group Ltd., joined the company's board. Ma was hired by TPG in 2007 to help spur the firm's push into China, but government agencies have gradually tightened rules over private equity investments in recent years. Through its affiliate, Newbridge Capital, the firm owns stakes in at least three Chinese companies: Shenzhen Development Bank, China Grand Automotive Group and Lenovo. Even as the private equity firms have pulled back their activity in the U.S. and Europe, they have continued to expand their presence in Asia, where there is still plenty of opportunity and credit markets are not as constricted. In May Kohlberg Kravis Roberts & Co. said it was partnering with Korea Development Bank to make joint investments in South Korea. And when J.P. Morgan Chase & Co. (NYSE:JPM) began to break up its principal investment management unit last week, it ended the division's direct private equity investing, except by the bank's Hong Kong-based Private Capital Asia Group. - George White See The Deal Pipeline story on Gome See The Deal Pipeline story on Daphne
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