U.S. IPO Market May Be Dead For PE, But China A Different Story

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U.S. IPO Market May Be Dead For PE, But China A Different Story

via WSJ.com: Private Equity Beat on 7/20/09

Private equity investors say one hurdle to investing in China is a lack of exit routes. But new statistics offer some hope.

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Five Chinese companies backed by private equity or venture capital firms went public in the second quarter, raising a total of $1.77 billion, according to Zero2IPO Group, a Beijing research and investment firm. Of the five - aluminum maker Zhongwang International Group Ltd., chemicals company Lumena Resources Corp., scrap-metal recycler China Metal Recycling (Holdings) Ltd., water treatment equipment provider Duoyuan Global Water Inc. and chemicals company Chemspec International Ltd. - three were listed in Hong Kong and two on the New York Stock Exchange.

That is the highest quarterly tally since the beginning of 2008, Zero2IPO said, and is well above both the $407.7 million raised in the second quarter of 2008 and $141.2 million raised in the first quarter of 2009. The total raised is also more than the $1.6 billion raised by all companies - let alone PE-backed ones - that went public in the U.S. in the second quarter, according to PriceWaterHouseCoopers.

The IPOs will enable 11 firms, including Olympus Capital Holdings Asia, OSSF Capital, Spinnaker Capital, Indus Funds, and affiliates of Credit Suisse, UBS AG and J.P. Morgan Chase & Co., to exit their investments over time.

The outlook for more public offerings also looks promising, given China Pacific Insurance (Group) Co.'s resurrected plans to go public in Hong Kong. The offering, which will pave the way for Carlyle Group and others to begin selling down their stakes, could raise up to $3.5 billion for the insurer.

The trade sale route was less robust, with only one deal exited in the second quarter, Zero2IPO said, without disclosing details.

"With the gradual recovery of the world economy, domestic and overseas markets kept climbing," Zero2IPO said. "The IPO remained the top option for PE funds to exit their investment."

Zero2IPO also offered some data on private equity fund-raising and investing in China in the second quarter. See our coverage here.

 

 

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