U.S. Private-Equity Firm Joins With China's Ctrip.com in New Fund
August 28 2016 - 10:10PM
Dow Jones News
U.S. private-equity firm General Atlantic is joining with
China's top online travel agency to start a new investment platform
to cut deals capturing China's newfound love of travel.
Ocean Link, formed earlier this year, is being backed by General
Atlantic and Chinese online travel market leader Ctrip.com
International Ltd. It is starting with an initial $400 million of
capital with plans to grow in scale as it finds more deals, its
executives told The Wall Street Journal in interviews.
The ambitions of Ocean Link are big, and already bearing fruit.
Ocean Link was part of a consortium, including Ctrip and internet
giant Tencent Holdings Ltd., that completed a $622 million buyout
of China's No. 3 travel-booking website eLong Inc. in May. Ocean
Link is leading a buyout of another New York-listed Chinese travel
company Qunar Cayman Islands Ltd., which is still ongoing.
Chinese consumers are spending more on travel at home and
abroad. Goldman Sachs Group Inc. expects Chinese tourists to spend
$450 billion on travel overseas by 2025, nearly double the $250
billion they spent last year.
The new travel-focused investment platform, structured as a
private equity vehicle but with a longer-term focus, will count
Ctrip Chairman James Liang and General Atlantic's new head of
China, Eric Zhang, as board members. Mr. Zhang had previously been
a key deal maker at rival Carlyle Group LP. Ocean Link has raised
funds in both U.S. dollars and Chinese yuan, giving it the
flexibility to go after deals both overseas and within China.
"Travel is a sector that is sizable and growing quickly in
China," said Tony Jiang, a partner at Ocean Link, in an interview.
"Sector focus is becoming increasingly important in the Chinese
private equity world."
The growth of travel spending is powered by young Chinese who
are spending a bigger share of their income on small luxuries such
as movie tickets and trips. The number of trips taken domestically
by Chinese residents rose by 10.5% last year from 2014, according
to the China National Tourism Administration. Many are also going
abroad for shopping splurges, where the same items from handbags to
beauty products are often cheaper than at home.
General Atlantic's Mr. Zhang said Ocean Link will play a role in
the continuing consolidation of China's online travel and hotel
industry. China's hotel sector remains fragmented and Alex Zheng,
chairman of Plateno Hotels Group, will also serve as a partner at
Ocean Link.
Ocean Link has gone after a number of smaller deals that might
escape the attention of bigger private-equity funds. It has
invested 6 million euros in Ruby Hotels, a Europe-based hotel chain
aimed at "lean luxury" travelers, who want top quality rooms but
are less fussed about other amenities typically offered by
five-star hotels. It plans to expand the brand in Asia. Ocean Link
has also put money into Mind Education, an operator of tours and
summer camps in China.
Started in 1980, General Atlantic has been a major investor
focusing on growth companies, including startups, globally. Last
year, it was one of the firms that led a $1.5 billion investment in
home-rental service Airbnb Inc. that valued the company at $25.5
billion. Within China, General Atlantic made a name for itself by
being part of a consortium that invested $350 million in Lenovo
Group Ltd., helping to finance the Chinese computer maker's
purchase of International Business Machines Corp.'s PC unit in
2005. Since it began making China investments in 2000, General
Atlantic has put $1.5 billion into 17 companies.
Write to Rick Carew at rick.carew@wsj.com
(END) Dow Jones Newswires
August 28, 2016 21:55 ET (01:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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