[CTRL] Carlyle group plans more investments in China

[William Shannon]

http://money.iwon.com/jsp/nw/nwdt_rt.jsp?section=news&news_id=reu-hkg120225&feed=reu&date=20020404&cat=INDUSTRY INTERVIEW-U.S. Carlyle group plans more investments in China Thursday April 4, 4:04 AM EST By Vicki Kwong HONG KONG, April 4 (Reuters) - Carlyle Group, the private equity fund run by former high-ranking U.S. government officials, says it plans more investments in Greater China after adding the artificial Christmas tree business of Boto International to its rapidly expanding Asian portfolio. "We're very interested in Greater China," Carlyle's Asia managing director X.D. Yang told Reuters in a telephone interview on Thursday. Yang, based in Hong Kong with a focus on Asian investments, said Carlyle would be particularly interested in companies thriving on China's low-cost manufacturing strength, and those that benefit from mainland consumers' growing purchasing power. "There are two things that are very strong about China. The first is its manufacturing base, which is truly the most efficient in the world in terms of scale, and the second is China's GDP growth, which translates into wealth growth," he said. Carlyle is one of the world's largest private equity firms with over US$13 billion of committed capital under management from more than 435 investors in 55 countries. It operates a US$750 million Asia buyout fund focusing on telecommunications and media, technology manufacturing, consumer products and financial services. Its geographical priorities are Korea, Taiwan, Hong Kong and Singapore. Carlyle's takeover of Boto's core assets, which also include its patio furniture business, marks its first investment in a Hong Kong-based business and is the latest move by the firm to expand its presence in Asia. It has been active in buying diverse assets in the region. It owns South Korea's KorAm Bank (16830) through a consortium, is in the process of buying a Japanese security firm and has agreed to take over South Korea's Kumho Tyre Co in partnership with J.P. Morgan Chase (JPM). The firm also has a 40 percent stake in Pacific China Holding Ltd, a unit of Taiwan's Pacific Construction (2506) which runs department stores in mainland China. In the latest deal, Boto will sell its Christmas tree and leisure furniture businesses for HK$994 million (US$127.4 million) to a company owned by limited partnerships run by Carlyle and the family trust of Boto founder and chairman Michael Kao. Carlyle, which has more than 480 employees worldwide, will take a 70 percent stake in the business, which operates a factory in the southern Chinese boomtown of Shenzhen with 8,000 workers. The plant is capable of filling 24,000 twenty-foot containers with Christmas trees a year. FROM HOLIDAY CHEER TO CHAIRS Although the Kao family sees limited growth prospects for fake Christmas trees, Yang said he was upbeat about Boto's core businesses despite the bankruptcy of one of its largest customers, U.S. discount retailer Kmart Corp (KM), which has cut orders significantly. "We think Boto has a very strong and diverse customer base. The foundation is very strong and we hope and expect Kmart will come back in some fashion," Yang said. But the focus will be on developing Boto's businesses in festive accessories and outdoor furniture, he said. Boto branched out into furniture production in 1997 to offset the seasonality of its holiday-related business. "For the other businesses, like accessories and lighting products, we look to accelerate their growth either through internal growth or maybe through acquisitions," Yang said. Carlyle is run by former U.S. Defense Secretary Frank Carlucci and several other cabinet members of former U.S. presidents Ronald Reagan and George Bush. Its management list includes Bush's former Secretary of State James Baker and former budget director Richard Darman, former U.S. Securities and Exchange Commission Chairman Arthur Levitt and former British Prime Minister John Major. The company says it has invested more than $6.5 billion since 1987 and achieved a realised rate of internal return of 37 percent. (US$=HK$7.8)