HONG KONG – Chase Capital Partners is raising a major new buyout fund focusing on Asia and is partnering with the International Finance Corp. and some of Hong Kong’s most prominent families to participate in an expected wave of divestitures and consolidations throughout the region.
According to Arnold Chavkin, a partner at Chase Capital, Chase Asia Investment Partners will hold a first close in April on more than $500 million. Chase began pre-marketing the effort nine months ago. Although the fund sports a target of $750 million, the final close may pull in much more than that, Mr. Chavkin said. Additional capital also will be raised from United States and European institutions.
Acting on a desire to make the fund as Asia-centric as possible, Chase Capital has enlisted Andrew Liu to head the effort. Mr. Liu is the former president of Morgan Stanley Asia and his family owns Liu-Chong Hing Bank, a Hong Kong middle-market consumer bank.
Limited partners that have signed on to the fund to date include Chase Manhattan Bank, which committed $250 million; the IFC, which is the investment arm of the World Bank Group; and several Hong Kong family groups, whom Mr. Chavkin declined to name.
The IFC also has agreed to set up a dedicated debt facility for the fund, although Mr. Chavkin said Chase Asia will seek deal financing from any source available.
Monument Group is the placement agent for the fund.
In establishing its presence in Asia, Chase Capital is taking steps to avoid being perceived as a wholly outside institution. Chinese business culture places great value on guanxi, meaning “connections,” and Mr. Liu has guanxi in spades. In addition to having long-standing ties to Chase Manhattan, the Liu family has close connections to prominent business families throughout Asia, as do the family limited partners in the fund. These ties may well help Chase Asia to be perceived as more of a local partner by Asian companies, Mr. Chavkin said. There is an underlying resentment in Asia toward Western money coming in to “take advantage” of depressed prices there, he noted.
The presence of guanxi also may facilitate deal flow. Chase Asia will be looking for corporate spin-offs and, to a lesser extent, for minority investments where the firm is allowed a great deal of control. The firm will also back companies seeking to make consolidations.
The fund will focus predominantly on Southeast Asia, China and South Korea, although Mr. Chavkin said the general partners are not ruling out investing in Japan.
Several sources who have invested in Asia in the past point out that having access to family networks does not necessarily guarantee good investment opportunities.
Crimson Asia Capital Holdings Ltd. in 1997 wrapped a $428 million buyout fund that it claimed would be able to tap a family network for deal flow. Crimson is an affiliate of the Chialese Financial Group of Companies, a direct investment financial services group owned by the Koos family of Taiwan. Since raising its fund, the firm has had a difficult time finding significant buyout opportunities, a limited partner in the fund said.
So far, Chase Capital has only limited co-investment experience in Asia, including a 1998 deal with Newbridge Asia to acquire AMT, a semi-conductor manufacturer, from Astra Microtronics, according to a general partner who invests in Asia.
Chase Capital has investment offices in Latin America and Europe, but no other dedicated regional funds. The firm also has an investment office in Singapore, but Chase Asia will be based in Hong Kong. Chase Manhattan’s banking activity in Asia dates back to the 1920s, Mr. Chavkin added.
Chase Capital is not alone in feeling that private equity capital will become a crucial component in rebuilding Asia’s economy.
The Carlyle Group late last month held a $450 million close on Carlyle Asia Partners, L.P., which has a target of $750 million. Also, H&Q Asia Pacific, Newbridge Asia and Unison Capital are raising buyout funds targeting the region.