Jul 2, 2011
The Business Times
CMIA Capital Partners launches 4th growth capital fund
This will be a US$200m investment partnership to provide growth capital to firms in China, S-E Asia.
SINGAPORE private equity firm CMIA Capital Partners has launched its fourth growth capital fund.
CMIA Fund IV LP is a US$200 million investment partnership that seeks to provide growth capital to companies in China and South-east Asia, including Singapore, said CMIA.
An out-of-court settlement with directors of an earlier fund managed by the firm paved the way for the new fund to be set up, its co-founder and managing partner Lee Chong Min told reporters yesterday. He declined to disclose the terms of the settlement, except to say that it was in the firm's favour.
Directors of CMIA China Fund II had earlier sued the fund manager over a share swap in October 2007 involving the now-delisted and insolvent firm FerroChina, which drew a counter-suit from CMIA and Mr Lee.
With this litigation out of the way, CMIA will be closing the first US$100 million capital for the new fund 'CMIA Fund IV' in three months' time and another US$100 million probably in the following 12 months.
The new fund will pick up deals in the range of US$5-20 million, Mr Lee said, and CMIA is targeting an investment return (IR) of 30 per cent from this fund. There is already a pipeline of eight deals waiting to be sewn up.
Though competition is sizzling in the private equity space in China as many PE firms are eyeing the agricultural space, Mr Lee said there are many opportunities as the sector undergoes a period of consolidation.
CMIA is not competing head-on with the many domestic yuan funds that are known for their swift deal-cutting and appetite for high valuation premiums as CMIA typically looks for portfolio companies at a discount.
'Business is competitive in nature, especially in China. The bigger challenge is finding good management teams to work with,' Mr Lee explained.
CMIA has sought to mitigate accounting risks in its investments through beefing up management with good finance officers in every company it invests in, he added.
As a Singapore-based firm, CMIA remains keen to invest in local small-and-medium sized enterprises (SMEs) that already have or want a China exposure.
The first deal for Fund IV is likely to be a Singapore company in the precision engineering industry. Mr Lee said CMIA is investing in the company to help in its acquisition of a competitor in China.
'We are a Singapore-originated PE firm. That's why, particularly for this fund, we would like to make investments in Singapore and in the region,' added Anson Wang, co-founder and managing partner of CMIA Capital Partners.
The PE firm had told BT in an earlier interview that it was looking for opportunities to co-invest with the Singapore government. Temasek will be managing phase one of an announced government co-investment scheme.
Since 2003, CMIA has lead-invested US$600 million into more than 20 companies in China. Though two investments could be in the red, its overall portfolio has delivered an IR of close to 28 per cent or a return multiple of two times. Two of its portfolio companies are slated for listing on China's A-share market next year.
The latest company it brought to listing in Singapore was China Minzhong, a Fujian vegetable producer. Post-IPO, its stake is held through High Focus International Ltd (HFIL), which is 28.7 per cent owned by CMIA China Fund II.
Mr Lee noted that China Minzhong's share price is expected to rise further and the group could achieve earnings growth of 30 per cent or more. But with the fund-life of HFIL coming to an end and with the need to meet the targeted IR, it has been divesting shares in China Minzhong.
'Business is competitive in nature, especially in China. The bigger challenge is finding good management teams to work with.'-- Lee Chong Min, managing partner
