Legend bets on 10b yuan private equity fund, shareholder changes
A shareholder reshuffle and a decision to set up a 10 billion yuan (HK$11.35 billion) private equity fund are among key strategies Legend Holdings has taken to ride out the storm that is buffeting the group, according to chairman and chief executive Liu Chuanzhi.
Liu also played down the reasons why Legend's founding shareholder, the China Academy of Sciences, sold a big chunk of its 64 per cent stake to a private domestic conglomerate, China Oceanwide Holding Group, for 2.75 billion yuan about two weeks ago, pointing out that the academy had retained its controlling shareholder position with a 35 per cent interest.
He said the deal was part of the academy's decision to divest about 70 per cent of its investment portfolio of about 300 assets, while Lu Zhiqiang, the owner of China Oceanwide, would bring his investment experience in property and financial services to the aid of the group.
'Legend will participate in direct investments as a new strategy going forward,' added Liu, who is also the chairman of Legend's subsidiary and the world's No 4 computer maker, Lenovo Group.
Liu said branching into direct investments in private enterprises was 'a natural step forward' in Legend's corporate development, which had its roots in computer manufacturing 25 years ago and set up private equity fund Hony Capital six years ago.
Some analysts who were surprised at Legend's management reshuffle said the new strategy would diversify Legend from over-reliance on Lenovo. Lenovo lost US$16.1 million in the three months to June, its fourth consecutive quarter in the red as tough competition ate into margins.
Liu said the 10 billion yuan fund was earmarked for the next five years as direct equity investments in industries such as technology, financial services and new energy sources.
Although some analysts said there were signs of overinvestment in wind and solar power, Liu did not think this put an end to new energy's growth prospects, given its broad sources that include oil and gas.
He added that Legend would take a controlling shareholding in any targeted companies and hold the investments on a long-term basis.
He said Legend would not compete with the group's investment arms, Hony and private equity fund Legend Capital, with the parent focusing on fast-growing start-ups and Hony eyeing firms in a harvesting stage, or that are ready to go public. Legend Capital specialises in risk management.
'Legend and Hony will complement each other,' Hony chief executive John Zhao said. 'The mainland market has no lack of liquidity, but there is a lack of private equity funds that can help with management expertise.'
He said this meant Legend could share management expertise, manufacturing experience and funding.
The group had revenue of 115.2 billion yuan and total assets of 64.4 billion yuan last year. It was started by 11 scientific researchers with seed money of 200,000 yuan in 1984.
