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Hong Kong's PAG seeking to raise $9 billion with new buyout fund

By Reuters

  • 29 Oct 2021
Hong Kong's PAG seeking to raise $9 billion with new buyout fund
Credit: 123RF.com

Asia-focused investment firm PAG is aiming to raise $9 billion in what would be its fourth and largest buyout fund, people with knowledge of the matter said, adding to the region's abundant investment dry powder.

The Hong Kong-based firm has kicked off fundraising and a first close of the fund is expected by mid-2022, the people said, declining to be identified as the information was confidential.

PAG, which manages $45 billion in assets, declined to comment.

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Roughly two-thirds of its PE portfolio is in China and the new fundraising underscores robust investment interest in the country despite an unprecedented regulatory crackdown on a range of sectors from technology to real estate to private tutoring.

The fundraising is also the latest in a slew by Asia-focused private equity firms this year, as investors flush with capital seek better returns amid post-pandemic economic recoveries while taking advantage of low interest rates.

PE-backed deals in Asia Pacific (including Japan) for 2021 have already hit an annual record, with $187.6 billion done as of this week, Refinitiv data shows.

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Funds in Asia are also sitting on an unprecedented $654 billion of unspent capital, a 70% surge from the level at mid-year, according to data provider Preqin.

More than 340 funds have raised $143 billion this year, beating 2020's total amount of $122 billion but below levels of $250 billion or more in 2016-2018, Preqin's data showed.

The average fund size this year, at $416 million, is significantly higher than in the last five years, when levels ranged between $150 million to $230 million.

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Hillhouse Capital raised $18 billion in the region's largest fund in August, a few months after KKR & Co Inc raised $15 billion for its fourth pan-Asia fund, the data showed.

Hong Kong-based Baring Private Equity Asia (BPEA) has reached the first close of a new fund targeting $8.5 billion and the final size could be increased to $10 billion, two sources familiar with the matter said. BPEA declined to comment.

Other managers targeting bigger funds include China's Primavera Capital, Boyu Capital and FountainVest Capital Partners, Reuters has reported.

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Led by Chinese dealmaker Weijian Shan, PAG's PE funds target large-sized control, buyout and structured minority deals in the consumer, technology, healthcare, financial and business services sectors.

PAG is planning to list a merged entity of two Chinese industrial gases portfolio companies - Yingde Gases and Shanghai Baosteel Gases offshore, most likely in Hong Kong. Their combined valuation is estimated at more than $10 billion, sources have said.

In March, it bought a controlling stake in Indian financial services firm Edelweiss Wealth Management for $325 million and completed the purchase of Australia-based workspace company Unispace.

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PAG raised $6 billion with its third fund in 2018 and $3.6 billion with its second fund in 2016. It also raised $525 million for a growth fund earlier this year.

Portfolio firms also include U.S. printer maker Lexmark and auto safety products maker Joyson Safety.

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