Failed float dampens CDH's global hopes

The mainland's biggest buyout firm, CDH Investments, is known as the "Blackstone of China" for its savvy deal-making and spread of businesses, but last month's pulled initial public offering of pork producer WH Group is a setback to its global ambitions.

The deal thrust a spotlight on CDH, which first invested in WH in 2006, and exposed its limited experience in handling big IPO exits from its investments in a global financial centre.

"If we believe Chinese private equity is going to rival the Carlyles and the Blackstones, they need to clearly be able to demonstrate they can do deals - and successful deals," said Fraser Howie, a co-author of Red Capitalism. "Not just a deal, but have a pattern of operating successfully in a number of different fields, and frankly, no Chinese company in any industry has shown its ability to do that yet."

The original US$5.3 billion offering by WH would have been the biggest for a private equity backed company in Asia. Only Carlyle Group has completed a similar recent offering in the region, with its US$3.1 billion float for China Pacific Insurance Group.

CDH won kudos for engineering WH's US$4.9 billion purchase of Smithfield Foods, the largest acquisition of a US company by a Chinese firm, and Wu Shangzhi, its co-founder, a former World Bank banker and an elder statesman of Chinese private equity, suggested China's economic power would lead to more such deals.

"The competitive advantage certainly now is pointing to a different direction. There is a compelling reason for the transaction, there are going to be more of these happening," Wu said.

CDH is among a number of Chinese firms eyeing global deals to distinguish themselves from domestic competitors as they vie for investor dollars.