Chinese construction firm to set up $482m M&A fund

Zoomlion Heavy Industry Science and Technology Company, a Hong Kong-listed construction equipment company, plans to set up an investment fund targeting industrial acquisitions and state-owned assets and enterprises in China. 

The new fund, dubbed the Shanghai Lulian Junhe Industrial Equity Merger and Acquisition and Investment Fund Partnership, has a size of 3.21 billion yuan ($482 million; €429 million). Zoomlion Capital Company, a wholly-owned subsidiary of the Hunan-based firm, will contribute 500 million yuan to the fund. 

The vehicle’s potential investors include a number of investment funds and corporates, according to a filing with the Hong Kong Stock Exchange. Anhui Railway Development Fund, Shanghai Changtai Investment Company, Shanghai Hede Yongxin Fund II, Jiangsu New Yangzi Shilpbuilding Company, and Shanghai Yu’en Environmental Technology Partnership, will each contribute 500 million yuan while Greenland Financial will commit 200 million yuan to the fund. 

Anhui Railway Development Fund is a state investment vehicle with a mandate to invest in strategic infrastructure projects and lead industry reforms. It has recently teamed up with Chinese solar developer Sungrow Power Supply to set up a 10 billion yuan energy fund which invests in the renewables industry and it plans to invest in Shanghai Safbon Water Service Company as the third-largest shareholder in the water utility. 

State-owned Chinese property developer Greenland Holdings, the parent of Greenland Financial, is recently expanding its investments into PPP projects, including subways, highways and urban projects, the company’s director, Jimmy Wang, told press in Hong Kong. Securing a subway project in Nanjing last month, the company saw infrastructure as a priority as it would create a synergy with real estate development. 

Zoomlion plans to set up a fund management company called Shanghai Lulian Junhe Equity Investment Management Centre, with an initial contribution of 1 million yuan. The new entity will manage the fund, which has a term of seven years, including an investment period of four years and an exit period of three. 

The vehicle aims to invest in “leading players of each sub-sector along the industry chain and capture the opportunities arising from the reform of state-owned assets and enterprises”, the company said in the filing.

Zoomlion’s core businesses involve the development, manufacture, sale and leasing of heavy industrial equipment and construction machinery, with a presence across Asia, Africa, Europe and America.