BEIJING – The Bank of China (BOC), the third-largest lender in China, is raising at least $1.3 billion for three separate private equity funds, PE Week has learned.
One of the funds will focus on buyouts and hopes to raise up to $1 billion.
The funds, which will invest in media, real estate and special opportunities, will be managed by the bank’s wholly-owned private equity subsidiary, BOCI Investments Ltd., in Hong Kong and will be led by Managing Director Robert Xie.
BOC International Holdings, the investment banking arm of BOC, has invested in private equity in the past, using funds from the parent institution. However, Xie says that BOCI Investments, the newly formed private equity unit of the group, will invest funds that are principally raised from outside investors, although BOC will be an LP.
The working name of the first fund is BOCI Investments Media Fund, which is being formed with an unnamed but publicly listed international bank.
Xie says that BOCI and the bank have each agreed to contribute an initial $50 million towards an anticipated first close of $100 million. The fund’s target size is $300 million.
The first close is set for early 2006 and a final close later next year. Xie says that the fund will invest in entertainment, media and telecommunications, with a focus on such traditional media as radio, newspapers and magazines in the greater China region. Xie says this market, which is primarily government owned, is a fertile ground for private equity investments as government controls are being lifted from media.
The second fund, China Property Investment Fund, is another joint venture. This one is with the United Kingdom’s Grosvenor Group, a privately held property asset management firm with about $5 billion in assets across 15 different funds. Both parties are contributing $5 million in seed capital for the fund with a goal of a $100 million first close and a final goal of $500 million.
Xie says the fund will invest in office buildings, retail, parking and historical buildings and it will only invest in revenue-generating properties. Xie says the group plans to create a Real Estate Investment Trust Fund from the assets of the fund, which it wants to list overseas.
The third fund, which has the working name of BOCI China Special Opportunity Fund, is a buyouts fund. Xie says that he hopes to raise between $500 million and $1 billion for the fund.
BOC’s fund-raising plans have been underway for almost a year as Xie has hired six professional staff in Hong Kong and Beijing. Xie says that he expects to build a staff from its partner firms as the funds are raised.
At a Glance
BOCI Investments Ltd. is a wholly owned but separate legal entity of the Bank of China (BOC), which is a nearly 100-year-old bank that employs 115,000 people and manages $4 trillion in assets as China’s third largest lender
The Chinese government is said to be preparing BOC for a foreign IPO. In January 2004, the government injected $22 billion into the bank to bolster its capital position in preparation for a public offering. UBS is believed to be the frontrunner amongst foreign investors seeking to obtain a share of BOC before it launches an IPO on a foreign exchange.