High-profile hire creates coup for Blackstone

PUBLISHED : Tuesday, 22 May, 2007, 12:00am
UPDATED : Tuesday, 22 May, 2007, 12:00am

United States private equity firm Blackstone Group's high-profile hire in January of former Hong Kong financial secretary Antony Leung Kam-chung paid off after he engineered the US$3 billion equity investment in the group by China's State Foreign Exchange Investment.

Mr Leung declined to comment on the deal.

Three weeks ago, Mr Leung met senior government officials to discuss Blackstone and the kind of investing the firm does. It was at that meeting that the officials talked about investing in the firm before its flotation, a source said.

The two parties announced yesterday that State Foreign Exchange Investment, which will invest about US$200 billion of China's US$1.2 trillion foreign reserves, would take a 9.9 per cent stake in Blackstone at the time of the group's pending public share offering in New York.

Things moved at a fast pace after the initial meeting as Beijing laid aside its traditional, and time-consuming, consensus-building approach to decision-making.

'They were organised and quick with responses that one would have expected from an extremely experienced group of people negotiating a transaction,' said the source. 'It's not what you would expect from a government anywhere.'

State Foreign Exchange Investment answers directly to the State Council. After Premier Wen Jiabao approved the deal, the transaction was signed at the weekend. No further approvals are necessary.

'The investment is a coup for Blackstone,' said one market observer who asked not to be identified and was not involved in the transaction.

Blackstone hired Mr Leung five months ago to run its new China office in Hong Kong and help it seek key deals in the mainland.

The company's New York-based senior managing director, Ben Jenkins, has also moved to Hong Kong.

The firm was following in the footsteps of rivals such as Kohlberg Kravis Roberts, Bain Capital and Carlyle Group.

Blackstone, which made its name organising the largest leveraged buyouts in history, had hoped the contacts Mr Leung had developed during his two-year tenure as Hong Kong's financial secretary and stints in the investment banking world at JP Morgan and Citi would create opportunities for the firm, particularly in China.