(Reuters) – Private equity firm CVC Capital has agreed to invest over $200 million into China education company EIC Group, buying shares from its founder and rival private equity firm Actis Capital, two sources with knowledge of the matter told Reuters.
The deal will give CVC Capital a substantial stake and a greater level of management control over EIC than Actis had, the sources said, without disclosing the exact stake CVC would own.
EIC, which specialises in providing coaching services to students in China seeking an overseas education, becomes the latest in a series of China buyouts where business owners have sold their shares to give more control to incoming investors.
The trend is fuelled by lengthy waits to get to a public listing in China, where the securities regulator has lifted a freeze on IPOs this month after a 15-month hiatus.
Actis and EIC did not respond to request for comments. CVC declined to comment. Sources declined to be named as the deal was not public.
Actis, an emerging markets private equity investor, in 2011 bought a minority stake in EIC for an undisclosed price. The firm convinced the founder, Joe Li, to sell part of his shares to provide CVC with an increased stake in the company.
CVC is no stranger to joint control structures. The firm in 2011 struck a deal with Indonesia’s cable television and Internet operator PT Link Net which gave them a 49 percent stake for $269 million, Reuters reported at the time.
Owners of China’s small and medium-sized companies prefer to exit their investments through IPOs, which tend to generate higher returns.
But stricter regulations for offerings in China, a choppy public market in Hong Kong and tighter credit conditions are helping private equity firms, which are unable to exit minority stakes through public listings, convince owners to give up control, sources have said.
CVC agreed a similar deal to invest in high-end restaurant chain South Beauty late last year, which had failed to get to a listing. That followed an earlier deal for Swedish firm EQT Partners to take majority control of RCS Group Co for around $170 million. EQT bought stakes from both the Chinese owner and private equity backer Warburg Pincus.