HONG KONG (Reuters) – China’s rejection of Coca-Cola’s (KO.N: Quote, Profile, Research, Stock Buzz) attempt to buy Huiyuan Juice (1886.HK: Quote, Profile, Research, Stock Buzz) should not deter global private equity firms from investing in the country, JPMorgan’s (JPM.N: Quote, Profile, Research, Stock Buzz) top Asia private equity banker said on Wednesday.
Anand Narayan, the bank’s head of financial sponsors coverage for Asia-Pacific, also told the Reuters Private Equity and Hedge Funds Summit that private equity firms in the region are focused on investing in retail and consumer goods, with the main goal of tapping China and India.
“People have successfully invested and taken money out of China. So, one particular transaction should not influence their ability or shift their views in terms of dealmaking,” Narayan said, referring to the Coke deal.
“Virtually every firm has a China strategy. To them, fundamentally, it’s about companies,” he added.
Private equity activity in Asia, like the rest of the world, has ground to a near halt, hit by the economic slowdown and credit crisis.
But several private equity firms are still sitting on large piles of money allocated to invest in deals across Asia.
One investment theme the firms are eyeing closely is domestic consumption plays, according to Narayan.
“The element of retail and consumer goods is, without a doubt, the focus,” he said. “There are other things like industrial goods, but feeding people, clothing people, making sure they’re able to buy goods, those are the three things people are looking at.”
Some recent examples include Kohlberg Kravis Roberts & Co.’s KKR.UL plans to invest $100 million into China’s Mengniu Modern Farm. On Wednesday, U.S. restaurant operator Yum! Brands (YUM.N: Quote, Profile, Research, Stock Buzz) agreed to buy around 20 percent of China hot-pot chain Little Sheep (0968.HK: Quote, Profile, Research, Stock Buzz) from U.K. private equity firm 3i Group (III.L: Quote, Profile, Research, Stock Buzz).
Despite the lack of dealflow, Narayan said he expects transactions will be picking up by the third quarter.
“As I look at the rest of 2009, given the dislocation of the equity and debt markets and the need for capital–and this being the growth engine of the world–if you believe that thesis, I think private equity has a very important role to play,” he said.
By Michael Flaherty
(Editing by Muralikumar Anantharaman)