Hony Capital eyes U.S. and European firms

HONG KONG (Reuters) - Chinese private equity fund Hony Capital, sponsored by Legend Holdings CNASCA.UL, is looking to take leading U.S. and European technology companies into China to increase their value.

Hony, among the most successful private equity funds in China, also hopes to raise a fifth U.S. dollar fund at no less than the $1.4 billion size of its fourth, CEO and managing partner John Zhao said on Thursday.

“There’s a lot of great technology companies out of Silicon Valley, out of Europe, out of Japan, Germany, that if they could get their technology or product quickly pushed into the Chinese market they will be many times more valuable,” he told Reuters.

The first step to increasing value, and penetration of China, is to change the mindset of a company board so it does not see the country purely as an export market, he said.

Zhao said Hony’s role with these companies is to use its expertise in China to increase penetration of the market.

“Many companies will not do that successfully if ... the board just visit once or twice a year,” he said in an interview after a company event.

Zhao said Hony's investment last year in Singapore-listed Biosensors International Group Ltd BIOS.SI is an example of the kind of deal he hopes to repeat.

Hony bought 30 percent of Biosensors and took a board seat.

“We’re going to do more of these,” said mainland-born Zhao, a graduate of the Kellogg School at Northwestern University’s MBA program.

Zhao also said Hony Capital, which raised one of China’s first market-driven private equity funds in 2003, will begin raising its fifth U.S. dollar fund before the end of 2011.

He said the fund would be no smaller than Hony’s last dollar fund, which raised $1.4 billion in 2008, adding only that it will approach existing investors.

Hony's previous investors include the Bill and Melinda Gates Foundation, California State Teachers Retirement System, Canada Pension Plan Investment Board, Goldman Sachs GS.N Asia LLC, and Singapore sovereign wealth fund Temasek Holdings Pte Ltd TEM.UL.

The firm has raised four U.S. dollar funds and two yuan funds, and has around $4.4 billion assets under management, according to a source familiar with the matter.