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CDB seeks to join TPG stake purchase

China Development Bank, one of the country’s largest state-owned banks, has applied to regulators for permission to join a group of sovereign wealth funds buying a minority stake in buy-out firm TPG, according to people familiar with the matter.

CDB’s request is the latest indication of the private equity fever sweeping China as local dealmakers leave the major buy-out firms and banks to set up their own investment firms.

At the same time, local Chinese financial institutions and governments – as well as wealthy families – have become increasingly important as a source of funds both for domestic and international companies that have raised local currency funds in China.

CDB, if it receives regulatory approval, will join Government of Singapore Investment Group and the Kuwait Investment Authority, which are investing hundreds of millions of dollars into the San Francisco-based private equity group, which has about $50bn under management.

In the past, regulators have not always granted CDB’s requests. China’s Banking Regulatory Commission declined to allow the lender to extend rescue finance to Citigroup, the US bank, during the financial crisis three years ago.

But today, given China’s growing foreign currency reserves, the government is anxious to encourage offshore investments to offset these capital inflows.

TPG has been one of the most active and earliest movers among the international firms to invest in China. It has close relations with both China Investment Corp, the Chinese sovereign wealth fund mandated to invest offshore, and with the State Administration for Foreign Exchange, which manages the country’s currency reserves.

Safe put $2.5bn into TPG’s flagship fund in 2008 in what was believed to be one of the largest investments into the private equity industry by a sovereign wealth fund.

The mandate of CDB – which is not publicly listed, unlike many of its peers such as China Construction Bank – is to lend money in accordance with Beijing’s national policy, financing undertakings from the high-speed railway lines that criss-cross the country to energy projects in Latin America, telecoms ventures in India and mines in Africa.

But under Chen Yuan, its ambitious chairman, it has long aspired to do deals on the international stage.

The move comes at a time when TPG’s own China business is in transition, with the buy-out group searching for a co-head for its China business after several key defections.


Eric D. Schwerin
Rosemont Seneca Partners, LLC
1010 Wisconsin Ave., NW
Suite 705
Washington, DC 20007
(202) 333-1880
eschwerin@rosemontseneca.com
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