3i Moving All China Staff to Beijing

British private equity firm 3i Group said on Wednesday it will close its offices in Hong Kong and Shanghai but relocate its China dealmakers to Beijing to save costs and focus more on mainland Chinese deals.

Chris Rowlands, 3i’s managing partner for Asia, also told Reuters in a telephone interview it aimed to conclude two to three China deals before the end of March, including a deal which would become its first investment in China’s healthcare sector.

Earlier this month, 3i announced that it would reduce its global headcount by about 15% in response to toughening market conditions.

Rowlands said the reorganisation of its China offices, which will become effective next month, is part of 3i’s global plan to improve cost efficiency and to focus more on China deals.

In the meantime, 3i will keep its offices in Mumbai, India and Singapore. Dealmakers in the city-state will be responsible for investments in Singapore, Indonesia, Malaysia and Thailand, Rowlands said.

“Despite the economic issues that we are all facing, this is a time when companies turn to private equity firms for growth capital because we all know it is very difficult to get companies to list on stock markets at the moment,” said Rowlands.

“It’s also becoming more and more difficult for companies to raise additional debt, so it’s always a classic period where growing companies turn to private equity firms like 3i to increase their capital base,” he said.

Currently, 3i has two partners for China deals — Anna Cheung based in Hong Kong and Albert Xu in Shanghai. Both Cheung and Xu have agreed to be relocated to 3i’s Beijing office to continue to take charge of its China investments, Rowlands said.

At present, 3i also has eight investment executives located in Hong Kong, Shanghai and Beijing. Two of them will leave the firm and the other six will move to Beijing.

CHINA STILL IN FOCUS

3i, one of the most active foreign private equity investors in China, has invested about US$300m in China deals since 2003, including digital advertising company Focus Media and Chinese hot-pot restaurant chain Little Sheep.

In China, 3i typically holds investments in China for three to five years, with the average deal worth US$50m to US$100m, 3i’s Cheung told Reuters in an interview in September.

Rowlands said the firm was not in a hurry to sell holdings of its current portfolio companies in a poor market environment.

3i was looking for deals, in particular, in consumer, retail, energy and healthcare sectors in China, he said.

“The only question is when the pricing will feel right,” he said.

“At the moment, it’s very difficult to get a good benchmark of pricing and we are hoping that things will start to look a bit more stable probably in the second quarter or third quarter,” he said, adding dealmakers will feel more confident to make investments by then.

The two or three China deals 3i aims to close before the end of March are deals that are already in progress, Rowlands said.

(By George Chen, editing by Jacqueline Wong)