China's GSR Capital to launch $6.8b fund

Investment firm to target Europe as it seeks to acquire global technology companies

HONG KONG • Chinese investment firm GSR Capital is launching a US$5 billion (S$6.8 billion) fund to invest in global technology companies, counting on huge demand at home to create economies of scale in pharmaceuticals, energy saving and mobile phone technology.

The firm will target Europe, where valuations are more reasonable than in the United States, its chairman Sunny Wu said yesterday.

"We're looking at the top one or two companies in the world in their sectors," Mr Wu said in an interview in Hong Kong.

"They may not be growing fast, but they will , with the China angle."

Little-known GSR Capital shot into the limelight in April when it teamed up with other investors to buy Philips' lighting component unit for US$2.8 billion, trumping marquee buyout firms, including a joint offer by private equity firm KKR and CVC Capital, and a separate one from Bain Capital.

Little-known GSR Capital shot into the limelight in April when it teamed up with other investors to buy Philips' lighting component unit for US$2.8 billion (S$3.8 billion), trumping marquee buyout firms, including a joint offer by KKR and CVC Capital, and a separate one from Bain Capital.

Mr Wu, a former Nortel Networks executive with backing from a Hong Kong solar power magnate, is raising a buyout fund to source larger acquisitions of technology- heavy companies with the potential to grow in China.

He is seeking to add to this year's US$28.1 billion worth of cross-border deals by Chinese private equity firms, up from US$10.2 billion in the same period in 2014, data compiled by Bloomberg shows.

The fundraising is coming on the heels of increased volatility in Chinese equity markets in the past several weeks, with a slump in mainland China markets from mid-June wiping out more than US$3 trillion in market value of listed firms.

Chinese technology companies have been trying to become more global, buying out internationally recognisable brands and tapping world markets to get closer to overseas investors.

"Growth now in the US, in Europe and in Asia is soft... but within that, some sectors are hot, primarily in the technology space," said Mr Wu, who is co-founder of GSR Ventures and chairman of GSR Capital.

Chinese state-owned Tsinghua Unigroup is eyeing a bid for US-listed Micron Technology for about US$23 billion, set to be China's biggest outbound M&A.

The deal followed the record- breaking US$25 billion initial public offering last year in New York of e-commerce giant Alibaba Group.

GSR Ventures manages about US$2 billion and it teamed up with bigger partner Oak Investment Partners and billionaire Chinese solar magnate Cheng Kin Ming to buy the Philips unit.

GSR and Oak previously jointly invested in LED lighting firm SunSun Lighting and battery maker Boston Power, where Mr Cheng is also an investor, among others.

A GSR-backed fund is leading a group of investors that agreed in March to acquire control of the Philips Lumileds business for US$2.8 billion.

The buyers have received US anti-trust approval for the deal and aim to complete the purchase by October, Mr Wu said.

Mr Wu's funds, whose executives have worked at companies including Samsung Electronics, will partner entrepreneurs to enter areas where GSR does not have its own expertise, he said.

In China, "the people who will make money have to compete globally", Mr Wu said. "We want to change the industrial landscape."

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on July 28, 2015, with the headline 'China's GSR Capital to launch $6.8b fund'. Print Edition | Subscribe