China acquires $3 billion stake in Blackstone
(Update: This just in: Texas Pacific Group and Goldman Sachs’ private equity arm have agreed to acquire Alltel, the wireless phone company, for $27.5 billion, the largest telecom buyout ever. There’s a frenzy of activity in the private equity world, and we’re likely seeing its peak.)
This isn’t a venture capital story, but is significant because it is an unprecedented commitment by China to a U.S. investment firm — and suggests more Chinese money may be flowing our way, possibly to VC firms.
The Chinese government said it would acquire a $3 billion stake in the Blackstone Group, the private equity firm, as party of China’s efforts to diversify its $1.2 trillion in foreign-exchange reserves beyond United States Treasury bills. The New York Times has the story:
Blackstone’s leader, Stephen Schwarzman, called the Chinese move “huge.”
The deal, which is set to coincide with Blackstone’s $4 billion initial public offering this year, will give China a roughly 8 percent stake in Blackstone, which owns companies that have 375,000 employees and $83 billion in annual sales.
It would also represent a watershed for the booming private equity industry as it tries to gain a foothold in China. “It’s a historic change. It’s a paradigm shift in global capital flows,” said Schwarzman.”
Typically, large organizations such as pension funds like to invest in private equity firms because it lets them put lots of money to work. China is no different, in wanting a way to park its vast reserves. Pensions also invest in venture capital, but typically do so through intermediaries such as funds-of-funds, where capital can be invested in several VC firms at once. Look for China to consider doing the same.
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About the Author, Matt Marshall
Matt launched VentureBeat in September of 2006, with the realization that no one else was covering the entrepreneurial and tech innovation scene with the velocity or depth that he was. Prior to founding VentureBeat, he covered venture capital for the San Jose Mercury News from 2001 to 2006. In 2002, Matt was awarded "Journalist of the Year" by the Northern California Society of Professional Journalists. Prior to working at the Merc, he was a correspondent for the Wall Street Journal in Bonn, Germany from 1995 to 1998, and a writer for the Washington Post in 1994. Matt holds a PhD in Government and an MA in German and European Studies from Georgetown University. In addition to VentureBeat, Matt is also the Executive Producer of DEMO, the leading launchpad event for emerging technologies.
