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3i Group pours funds into mainland

By Hui Ching-hoo and Zhang Jin (China Daily)
Updated: 2006-04-07 06:05
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HONG KONG: Global venture capital company 3i Group said it would invest in four to five companies in the Chinese mainland every year, investing between US$20 million to US$100 million in each, in the coming years.

"We are realizing the opportunities in the economic growth of the Chinese mainland and India," Jamie Paton, managing director of 3i Asia Pacific, told China Daily. "Over the past five years, we have poured about US$400 million across Asia."

Managing US$11.7 billion globally, 3i Group said it is in talks to invest in three mainland firms and wishes to finalize the deals in two to three months.

One is in the manufacturing sector and two are in consumer sector, Paton said.

All three firms are still in developing stages and it may take two to three years to make them strong, he said.

3i will invest US$20 million to US$100 million in each company and plans to exit by listing the three companies overseas in three years.

With an office in Shanghai, 3i plans to open another one in Beijing this year.

Starting from 2001, 3i has invested in a number of mainland firms and witnessed fat returns.

One of its most successful investments was buying a US$8 million stake in media company Focus Media at the end of 2004. The firm was listed on the NASDAQ Stock Market in July of last year, raising US$700 million. The deal also marked the first mainland media company to be listed overseas.

Other examples include investment in the mainland's leading fire alarm system manufacturer GST, which floated its shares in the Hong Kong Stock Exchange last year.

The latest deal of 3i was the acquisition of chain store retailer Printemps for US$31 million at the end of last year. The retail group operates five outlets in the mainland and plans to extend to 15 by 2008.

"We expect the market capitalization of the company could expand by 15 to 20 per cent over the next five years," said Paton.

Overseas venture capitalists are attaching greater importance to the mainland market on the back of its consumption spree and fast-growing economy.

The mainland's small and medium-sized enterprises, which often encounter difficulty getting bank loans, are now resorting to venture capital.

The total amount of venture capital in the mainland reached US$1.07 billion in 2005, and that figure is expected to rise to US$1.5 billion this year, according to Zero2ipo.com Ltd, a venture capital market research company in Beijing.

(China Daily 04/07/2006 page10)