Chinese VC firm prepares US$5 billion war chest as it targets Western tech companies

A major Chinese venture firm has launched a US$5 billion fund devoted to buying up Western technology, internet and biotech firms that are looking to enter the Chinese market.

Following on from successful investments in a number of Chinese companies, including taxi and car-booking service Didi Kuaidi, which recently raised US$2 billion in a single funding round, GSR Capital will target international investment opportunities in industries that include clean energy, bio-pharmaceutics and life sciences, bulk commodity, traditional and internet finance, and wireless communication.

The fund plans to work closely with Good Resources Holdings, a Hong Kong-listed investment and financial services company, on the management of all the fund’s deals, which would be backed by financial instruments and potential co-investments from the global capital market.

“Our new fund will either buy-out or acquire a minority stake in target enterprises through a combination of equity and leveraged debt,” Sunny Wu Shen Chun, the chairman of GSR Capital, said on Monday.

GSR Capital is one of the most active technology investment firms in China with offices in Beijing, Hong Kong and Palo Alto, located in California’s Silicon Valley in the United States. The company’s family of funds has more than US$2 billion under management. It is focused on the semiconductor, wireless internet, clean energy, pharmaceutical and healthcare sectors.

Wu expected the GSR Global M&A Fund to further develop its acquired companies with the backing of mainland China and international resources. The goal is to either spin off these businesses through an initial public offering or sell them at a profit to other companies.

He is also the co-founder and managing director of GSR Ventures, a mainland Chinese venture capital fund that invests in start-up technology companies. He was appointed as the chairman of Good Resources last month.

Prior to the newly formed fund, Wu spearheaded efforts earlier this year to buy an 80.1 per cent stake in Lumileds, the combined light-emitting diode components and automotive lighting business of Dutch electronics giant Philips.

GSR GO Scale Capital, a fund sponsored by GSR Ventures and US private equity firm Oak Investment Partners, agreed to spend US$2.8 billion and a deferred contingent payment of up to US$100 million, to purchase Lumileds.

“GSR Global M&A Fund will continue duplicating the early investment successes in Boston Power, Airspan and Philips Lumileds, creating value and superior returns through China localisation with a top-notch team of industry leaders,” Wu said.

That would augur well for the health of mainland China’s domestic and foreign-inbound strategic mergers and acquisitions this year, despite the much-publicised slowdown in the country’s economy.

Reports early this month said the state-backed Tsinghua Unigroup had proposed to acquire US chipmaker Micron, the world's fourth-largest semiconductor company by revenue, for US$21 a share, which valued the buyout at US$23 billion.

Mainland China’s mergers and acquisitions activities last year reached record highs in both volume, 6,899 deals, and total value, US$407 billion, according to data from professional services firm PricewaterhouseCoopers. It said the bulk of those investments were made in the technology, consumer-related and financial services fields.