CVC cuts ties with Citi for third pan-Asian fund

CVC Capital Partners is terminating the joint venture with its former parent Citi for its third pan-Asian fund, potentially the largest Asia-dedicated investment vehicle.

Its Asia Pacific Fund I, which closed on $750 million in 2000, and Fund II, a record breaker closing on $1.975 billion in 2005, were raised and managed under a joint venture arrangement between CVC and Citi.

CVC Asia Pacific Fund III will be independent of Citi, Maarten Ruijs, managing partner and chief investment officer of CVC Asia Pacific, said.

Sources expect the third fund to attract up to $5 billion, which if CVC succeeds, would set a new record for the largest pool of capital to be raised for the Asia Pacific region.

Maarten Ruijs

Ruijs, without commenting on fundraising, told PEO the split from Citi was a “normal progression for a business of this size.”

“Citigroup will no longer own any shares but will make a capital commitment including its clients money,” he said.

Citigroup is expected to make a targeted commitment of $500 million to the fund targeting $4 billion, according to Pennsylvania Public School Employees’ Retirement System (PSERS), in a recommendation report.

PSERS also noted “the integration of CVC Asia Pacific business into CVC is ensured by the participation of three senior managing partners in Asia, Maarten Ruijs, Adrian Mackenzie and Roy Kuan, as shareholders and partners in the ultimate parent of CVC.”

In 1993, CVC Capital Partners completed its management buyout from the private equity arm of Citigroup Europe. It has always had autonomy over its European activities.

Strong returns from existing CVC Asia funds, particularly from Australian exits from Fund I, would favour CVC’s fundraising efforts, existing investors said.

PSERS, which described the fund as “one of the best performing Asian buyout funds of vintage year 2000” noted that it “generated a net fund IRR to investors of approximately 31 percent and 2.4 times realised cash multiple on capital drawn as of 31 December 2006.”

PSERS has recommended that its board invest up to $300 million in CVC Asia Pacific III.

In August, CVC Asia Pacific appointed Hong Kong financier Francis Leung as senior advisor in its Asia office.

Leung will work with CVC to develop investment opportunities in Greater China and he will advise CVC’s companies and management, the buyout firm said in a statement.

Leung was chairman of Citigroup’s Asia investment banking arm until last year. Leung previously worked as vice-chairman at BNP Paribas Peregrine.