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PEDaily E-Magazine Issue No.538 Summary

Core Content

This issue of PEDaily E-Magazine, published on June 21, 2012, provides an overview of the evolving landscape of China's private equity (PE) and venture capital (VC) industry, with a focus on investment trends, regulatory changes, and key market events. The magazine highlights the challenges faced by the physical consumer goods sector, the emergence of new funds, and the impact of global market conditions on local investment activities.

Main Views and Key Information

1. Investment Trends in Physical Consumer Goods Sector

• Slowdown in Investment: The traditional physical consumer goods industry, including textile & clothing, food & drinks, and daily necessities, has experienced a notable slowdown in investment since 2011.
• Historical Investment Data: From 2006 to May 2012, there were 366 investment deals in the sector, with 183 having disclosed investment amounts totaling US$7.98B.
• Resilience During Financial Crisis: Despite the global financial crisis, the consumer goods industry showed greater elasticity and lower risk, leading to a stronger momentum in attracting investments during 2009–2010.

2. New Material VC Fund in Hebei

• First of Its Kind: Hebei launched its first new material VC fund, Hebei Xinchan New Material Venture Capital Co., Ltd., with a first close of RMB250.00M.
• Partnership Model: The fund is a collaboration between central finance, local finance, and private PE funds, adopting the "government guidance, market-oriented operation and outsourced management" model.
• Investment Focus: It targets innovative businesses with high growth and high-tech capacity in early and growth stages.

3. Market Changes and Regulatory Environment

• Changing Climate: The capital market in 2012 is characterized by more rigorous regulation and fierce competition.
• IPO Challenges: The IPO market has been bumpy, with companies like Lashou.com withdrawing their applications due to poor performance of Facebook’s IPO and market instability.
• End of Windfall Era: The era of high returns for VC/PE is coming to an end, prompting investors to reconsider their strategies and prepare for a more competitive environment.

4. New Fund Initiatives

• Citic Securities Buyout Fund: Citic Securities established the first domestic buyout fund, which will focus on mature-stage projects and be used for merger and acquisition activities.
• Alibaba Delisting: Alibaba Group delisted Alibaba.com from the Hong Kong Stock Exchange by repurchasing shares at a 60.4% premium, signaling a shift in capital strategy and increased interest in buybacks.

5. Industry-Specific Investment Activities

• SNDA Culture Fund: SNDA, in partnership with Citic Securities, GF Securities, and CMSB, launched a RMB3.00B culture industry investment fund to support its future projects.
• DongGuan EONTEC Listing: The company listed on the GEM (Growth Enterprise Market), with plans to use the funds for light alloy die casting projects. It has a history of investment from several key players.

6. Market Rumors and Strategic Moves

• Baidu and UCweb Acquisition Rumors: There were ongoing rumors about Baidu’s potential acquisition of UCweb, but Baidu denied the report, calling it hearsay. UCweb’s CEO, Yu Yongfu, previously rejected the offer but may have reconsidered.
• Strategic Shareholder Move: Beijing Capital Investment plans to become a strategic shareholder of Honfund, expanding its investment presence in Hong Kong.

Conclusion

This issue reflects the dynamic and challenging environment of China's PE/VC sector in 2012, marked by a decline in physical consumer goods investments, new fund formations, market volatility, and strategic corporate moves. The industry is adapting to tighter regulations, changing investor behavior, and increased competition, signaling a shift towards more mature and diversified investment strategies.