A Capital launches $1.4 billion tech fund

Beijing-based Euro-Asia private equity fund A Capital has launched a technology fund targeting 1 billion euros ($1.4 billion). It is designed to help European companies develop businesses with China's large market, its chairman told China Daily on Tuesday.

A Capital Technology Fund will invest in innovative European enterprises in environmental and energy, digital, machine-to-machine, healthcare, mobility, logistics and high-end manufacturing sectors. It will use mergers and acquisitions as a way forward.

Machine-to-machine refers to technology that allows both wireless and wired systems to communicate with other devices of the same type.

This is the second fund of A Capital. Its first fund, which was launched in 2012, mainly invested in medium-sized companies in Europe to help them grow in China.

"Technology is becoming increasingly important to the economic ties between Europe and China. The two regions can complement each other's advantages," said Andre Loesekrug-Pietri, chairman of A Capital.

Andre said Europe has world-leading research and development and innovative companies but it lacks scale because of fragmentation and the low-growth of European markets.

"China has the market and the need for these technologies to tackle the massive challenges that it faces, in particular environmental pollution, urbanization and healthcare needs," said Loesekrug-Pietri.

Chinese leading equity investment firm ChinaEquity Group is committed to invest in the fund, but the amount was not revealed.

The two PE firms will also set up a joint renminbi co-investment vehicle in China that will raise at least 3 billion yuan ($483.3 million) from Chinese institutional and corporate investors for the fund.

"We are also interested in investing in famous brands, design centers, distribution channels and e-commerce platforms that can benefit from the vast market and rapid economic growth in China," Wang Chaoyong, chairman and chief executive officer of ChinaEquity Group, told China Daily.

Wang said the cross-border investments between China and Europe are different from traditional trading business and require professional fund-managing teams who understand better risk-control and value-added services.

The fund was launched on Monday at a signing ceremony in the presence of Chinese President Xi Jinping and Belgian Prime Minister Elio Di Rupo at the Egmont Palace in Brussels.

A strategic partnership was made between the fund and the Interuniversity Microelectronics Centre, a Leuven-based leading research center in nanotechnologies and electronics, allowing the fund to leverage the competence of the center's research and development, as well as talented people in the fields of microelectronics and new materials.

A Capital teamed up with Chinese luxury goods distributor Sparkle Roll to pay $30 million for a 7.71 percent stake in Denmark's Bang & Olufsen in 2012, helping the electronics manufacturer increase sales in China to offset weak demand in Europe and the US.

China has a strong demand for high-value-added firms in the industry and services sectors.

Mandarin Capital Partners is another private equity fund linking European businesses with Chinese partners.

Its first fund with total committed contributions of 328 million euros was invested in nine European companies and one Chinese business between 2008 and 2012.

Mandarin Capital Partners is currently raising funds for a second fund. A first closing was achieved in the second half of 2013.