January 25, 2010 / 6:50 AM / 9 years ago

Exclusive: China PM's son eyes $1 billion fund for deals

*By George Chen, Asia Private Equity Correspondent

HONG KONG (Reuters) - New Horizon Capital, whose co-founders include the son of Chinese Premier Wen Jiabao, aims to raise a $1 billion private equity fund to invest in domestic industry leaders ready to make initial public share offerings.

This would be the third and largest private equity fund for New Horizon, which had about $500 million under management since it was established in 2007, according to sources with direct knowledge of the matter.

New Horizon Capital recently completed raising $600-$700 million for its latest fund by a first closing date, with capital commitments from Japan’s Softbank Corp (9984.T) and Singapore state investor Temasek Holdings TEM.UL, the sources said.

It started pitching the fund as early as 2008, but found it tough going as a result of the financial crisis and suspended the fund until early 2009, the sources said.

“That was a very tough time, but now people are willing to pour money into the fund again since China is still the focus worldwide,” said one of the sources.

Softbank, run by influential Japanese tycoon Masayoshi Son, and Temasek were long-time investors since the firm launched its first fund in 2007, the source added.

The sources declined to be identified because of the sensitive nature of Wen’s family background. A representative for New Horizon Capital could not be immediately reached for comment.

BACK FROM THE U.S.

Wen Yunsong, also known as Winston Wen, helped form New Horizon Capital in 2005, a few years after graduating with an MBA from Kellogg School of Management at Northwestern University in the United States, according to the sources close to Wen.

Between graduation and the launch of New Horizon Capital, Wen started a telecoms equipment maker whose key clients included large banks and securities firms, according to Chinese and Hong Kong media reports. Wen later sold the company.

Beijing, which historically viewed private equity firms as speculators, is becoming more welcoming to foreign private equity funds that are boosting investment in China and creating jobs, which the government sees as key to maintaining social stability.

Despite Wen’s background, New Horizon Capital is considered a foreign fund because of its legal structure and the foreign sources of its dollar capital.

New Horizon Capital’s first fund was launched in 2007. Soon afterwards, Wen and his management team, which includes long-time friends from his U.S. days, made some quick investments in privately-held Chinese enterprises with potential to be market leaders.

“They have a very stable team ... They were schoolmates or old friends. They know each other very well,” said another of the sources.

TRACK RECORD

Private equity investment in China has a brief history, but New Horizon Capital has had some notable achievements.

It recently bought a large stake in Shenzhen-listed wind power producer Xinjiang Goldwind Science & Technology Co (002202.SZ), a leading wind power equipment maker in China. Goldwind is looking to raise $1.5 billion via a Hong Kong listing this year, Reuters reported last week.

Other New Horizon corporate investments, such as Yingli Green Energy YGE.N and Kingsoft (3888.HK), have already gone public.

New Horizon Capital is also an investor in Shineway Group, China’s top meat processor, in a landmark buyout deal led by Goldman Sachs (GS.N) a few years ago.

It is also an investor in Jiangsu Rongsheng Heavy Industries Co, China’s biggest privately-owned shipbuilder, along with Goldman Sachs and other funds. The company is seeking to list in Hong Kong, Reuters reported last year.

Editing by Chris Lewis and Ian Geoghegan

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