China-focused Welkin seeks London IPO, offering play on US$1.8 trillion market for unlisted mainland firms while private equity peers focus on Hong Kong
- The PE firm aims to raise up to US$300 million, offering global investors access to fast-growing unlisted companies in mainland China
- Hong Kong-based PAG Capital and Shenzhen-based Tiantu Capital filed to list in Hong Kong amid audit dispute between Beijing and Washington
A Hong Kong-based private group has become the second Chinese company this year to seek a listing in London, offering global investors a chance to participate in the US$1.8 trillion market for China’s fastest-growing unlisted firms.
WCPE aims to raise up to US$300 million, with the proceeds to be used for future investments with 15 per cent long-term total return target, according to its prospectus. Its first purchases would be a US$15 million stake in Welkin Fund II, and equity interests in 10 underlying portfolio companies worth US$15 million.
“[London] has a very deep pool of liquidity. There’s a long history of investment companies listed there,” Ivan Chu, chairman of WCPE, said in an interview. “It is a good place to engage shareholders.” The Welkin team has deep local market expertise and a good understanding of the Chinese business and policy environment, he added.
“We expect to see continued interest in diversification and access to international capital for Chinese issuers that are continuing to seek growth and expansion,” said Ivy Wong, Asia-Pacific chair of capital markets practice at law firm Baker McKenzie.
Welkin, with around US$500 million of external assets under management, is looking into a pipeline of investment opportunities worth the same amount, focusing on sectors such as advanced manufacturing, enterprise solutions and home-grown consumer brands.
Welkin Capital Management, investment manager of WCPE, delivered a compounded annualised return of 28 per cent for all investments across all Welkin Funds up until December 2021, the firm said.
The assets under management in China’s private equity market are worth at least US$1.8 trillion, according to Welkin.
“What a great time to be starting, when a number of players are seeking liquidity and looking to get out [exit their investments],” said Jonathan Lau, managing director of Welkin Capital Management. “We can actually choose what we’d like to acquire. Some would even call it a buyer’s market.”
Investors including pension funds are trying to rebalance their portfolios amid sluggish sentiment and a slowing global economy, according to the Welkin executives. It offers a chance for the team to leverage low valuations amid less competition in the Chinese market, they said.