Mainland-backed boutique bank Reorient Group will acquire about a third of Seoul-based EQ Partners, an unprecedented partnership between a South Korean PE firm and a Chinese entity.
The deal will see Reorient, helmed in Hong Kong by a team of former Cantor Fitzgerald executives, pay HK$32.7 million ($4.2 million) for a 33% stake in EQ Partners, a private equity firm with $800 million in AUM.
Reorient is backed by China Chengtong Holdings, a mainland conglomerate with more than 100 subsidiaries.
It marks the first known sizable acquisition by a mainland entity of a stake in a South Korean PE manager. James Kim, head of EQ Partners, will remain with the firm under the terms of the agreement.
The limited partners of EQ Partners Global Private Equity Fund No. 1, a $400 million vehicle launched in 2011, are South Korean pension funds, according to documents seen by AsianInvestor. It also runs a separately-managed account for the National Pension Service.
EQ Partners, which spun out of financial group Korea Investment Holdings in 2010, is one of South Korea’s smaller PE firms. South Korea’s larger PE players include $5.7 billion MBK Partners, headed by ex-Carlyle Group executive Michael Kim, and Vogo Fund, which runs $1.1 billion.
In that light, teaming EQ Partners with a well-capitalised strategic partner makes sense, notes one industry observer. The private equity firm had an after-tax net loss of about $340,000 in 2012, according to a statement by Hong Kong-listed Reorient.
“The South Korean angle is very important to us,” Brett McGonegal, Reorient chief executive, tells AsianInvestor. “It’s a very unique investment opportunity.”
McGonegal joined Reorient in 2011, along with fellow Hong Kong-based Cantor Fitzgerald executives Jason Boyer, Bradford Ainslie and Uwe Parpart. Their hiring was part of Reorient’s push to restructure China Chengtong’s underlying subsidiaries and also expand overseas.
While the acquisition will give Reorient and its mainland partners an entry into South Korea’s private equity sector, equally EQ Partners will benefit from the deal, says McGonegal.
“We’re an attractive partner for them as well,” he notes. “We give them quite an entrée into China. This should open up cross-border opportunities for EQ Partners.”
South Korea is no stranger to Chinese private equity, with SAIF Partners entering the market about decade ago before ceasing investment activities in 2007.