Warburg Pincus invests in Huarong

The booth of the China Huarong Asset Management Co at an international finance expo in Beijing. Warburg Pincus LLC is reported to be sinking nearly $700 million into Huarong. DA WEI/CHINA DAILY

Warburg Pincus LLC will invest close to $700 million in China Huarong Asset Management Co, people with knowledge of the matter said, in the biggest investment in the nation's financial industry by a foreign buyout firm.

Warburg Pincus bought the largest portion of a 21 percent stake that China's biggest bad-loan manager sold to a group of investors for 14.5 billion yuan ($2.4 billion), said one of the people, who asked not to be identified as the matter is private.

Rising loan delinquencies in China are adding to opportunities for the country's asset management companies, set up in 1999 to buy bad debt from State lenders. Warburg Pincus, whose president is former US Treasury Secretary Tim Geithner, finished raising $11.2 billion last year for its most recent private-equity fund.

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"Huarong is attracting interest because it is one of the largest AMCs in China," Ming Tan, a Hong Kong-based analyst at Jefferies LLC, said by e-mail. "It's getting rarer to find such large deals to invest in, especially at a pre-IPO stage where the valuation is more attractive and there's a clear exit timing."

Li Mingxia, a Beijing-based spokeswoman for Warburg Pincus, declined to comment on the investment amount.

Huarong said last week it sold a stake to eight investors including Goldman Sachs Group Inc and Malaysian sovereign fund Khazanah Nasional Bhd.

They were joined by domestic buyers China Life Insurance (Group) Co, Fosun International Ltd, China International Capital Corp, COFCO Corp and a unit of CITIC Securities Co.

The Beijing-based company plans to conduct an initial public offering in Hong Kong before the end of next year, Chairman Lai Xiaomin said at an Aug 28 briefing in Beijing.

Overseas private-equity firms have been involved in $10.9 billion of acquisitions in China so far in 2014, more than eight times the amount for the year-ago period, data compiled by Bloomberg show.

KKR & Co agreed last month to acquire a minority stake in Fujian Sunner Development Co, the nation's largest chicken breeder and processor, for about $400 million.

Warburg Pincus' investment in Huarong will be the biggest by an overseas private-equity firm in the country's financial industry, surpassing Carlyle Group LP's purchase of a $410 million stake in China Pacific Insurance Group Co in 2005, data compiled by Bloomberg show.

The purchase of the Huarong stake is Warburg Pincus' largest single investment in China, the private-equity firm said in an e-mailed statement to Bloomberg News.