China shuts PE door on Greenberg

December 10, 2008

the catastrophe of AIG aside for a moment, it’s hard to imagine what blemishes might have convinced Chinese authorities to shut the door on Hank Greenberg’s plan for China’s first half-foreign-owned private equity venture. Greenberg’s China credentials are legendary, and Beijing wonks say everything that gets done in the People’s Republic does so because of personal connections.

Hank’s investment firm, Starr International, had hoped to start the $145.5 million joint venture with China’s top brokerage, CITIC Securities. Could the problem have been CITIC, and its soiled investment plans in U.S. firms? It came close to dropping $1 billion into Bear Stearns and had $76 million in Lehman Brothers. Sources tell us that Chinese officials did not want to open the door to a rush of foreign private equity investment.

More specifically, one of the sources said: “The regulator doesn’t want to make it a unique case so that other foreign investors take it as a model.” Well, that certainly clears things up.

It’s not that China is opposed to private equity. Officials want to develop yuan-denominated funds run by domestic managers, to reduce companies’ dependence on bank financing.

But with private equity getting such bad press in the U.S., particularly with Cerberus trying to convince U.S. taxpayers to bail it out of its investment in Chrysler, it’s no stretch to imagine Beijing getting a little less excited about private equity than it was earlier in the year.

Deals of the day:

* Fayrewood, a British computer parts distributor, said it agreed to be acquired by privately held Letchworth Investments Ltd for about 29.3 million pounds ($43.4 million) in cash.

* Media Square said it agreed to sell part of its Illuminas marketing research consultancy business to market research company IQ Holdings for an initial 750,000 pounds ($1.1 million) in cash and shares worth 250,000 pounds.

* Avarae Global Coins, a UK-based company which invests in rare coins, said Equity Partnership Investment Company had bought about 14.3 million shares, representing 13.85 percent of voting rights in Avarae.

(Photo Credit: Reuters)

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