April 11, 2007 / 7:28 AM / 12 years ago

TPG fund makes first China investment: Yunnan Wine

HONG KONG, April 11 (Reuters) - A growth fund managed by the Texas Pacific Group [TPG.UL] has made its first investment in China, a $14 million stake in Yunnan Red Winery, underscoring growing private equity investment in the world’s fourth-largest economy.

TPG Growth, which specialises in investments across Asia and manages over US$1 billion of capital, intends to focus on US$10-$75 million investments in the country, starting with a “significant” stake in one of China’s five largest wineries.

The fund, an arm of Texas Pacific — which boasts some $38 billion managed via offices from Shanghai to San Francisco — will help Yunnan Winery build a nationwide sales network, TPG said in a statement.

It will also help introduce French and other foreign brands or wineries to the 10-year-old firm, according to the statement.

Chinese wineries such as household names Changyu Pioneer Wine (000869.SZ) (200869.SZ) — partly owned by Italian liqueur maker Illva Saronno and the World Bank’s International Finance Corp. — and Dynasty Fine Wines Group (0828.HK) are bracing for an influx of foreign competition.

Beijing is prising open a wine industry growing some 11 to 12 percent annually as increasingly wealthy Chinese opt for more expensive liquor, but steady competition is eroding margins.

Yunnan Red is the largest single wine brand in southwestern China, TPG said.

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