January 15, 2016 / 7:03 AM / in 2 years

'Grandfather of markets' leads China's charge into German M&A

* Chinese dealmaker Cai had key role in KraussMaffei acquisition

* His $1 billion fund to focus on Chinese deals in Germany

* He seeks to bring leading industrial technology to China

By Arno Schuetze and Denny Thomas

FRANKFURT/LONDON, Jan 15 (Reuters) - A veteran investment banker renowned for listing some of China’s biggest enterprises is turning his sights on Germany - and seeking to help Chinese companies snap up some of the country’s coveted hi-tech manufacturing firms.

Henry Cai - a former dealmaker for UBS and Deutsche Bank - was behind the biggest-ever Chinese acquisition of a German company this week, when a consortium led by state-owned China National Chemical Corp (ChemChina) agreed to buy machinery maker KraussMaffei Group for about $1 billion.

The consortium included his investment firm, AGIC Capital, and was a rare example of a Chinese state firm teaming up with a private equity group.

The deal represented the first investment for AGIC, which Cai founded last year after quitting investment banking. He is set to close his first fund at $1 billion in the next few months, and it will mainly focus on Chinese deals in Germany.

He is targeting deals in “innovative industrial tech” in areas like processing technology, robotics, automation, sensors, battery technology and environmental technology, according to people familiar with his thinking, but did not name any companies.

They said Cai’s rationale was that by buying into German companies - among the global leaders in industrial manufacturing technology - Chinese firms could gain the expertise they badly needed, and in return the Europeans could win access to growth opportunities in China.

Cai, one of China’s best connected dealmakers and for years among the highest-paid bankers in Asia, himself told Reuters that the two countries could complement each other.

“China and Germany have unique and natural opportunities and synergies, that’s why we set up that business model,” said the 61-year-old, a keen boxer and classical music fan.

Cai studied in Shanghai before working for the city’s municipal government and Shanghai Petroleum. He made his name working for UBS in China during the 2000s when he helped companies like PetroChina and Fosun International list in Hong Kong. Such deals helped earn him his industry nickname - the “grandfather of China’s capital markets”.

‘DOOR-OPENER’

He left UBS for Deutsche in 2010, though failed to replicate the scale of successful deals he had enjoyed at the Swiss bank, and is now bringing his skills to private equity - exemplified by his pivotal role in the KraussMaffei acquisition.

“What really motivates Cai is that he sees the ability to take German technology to China. German firms have hit roadblocks doing business in China and Cai can act as a door-opener, because he knows so many people and the culture,” a source close to the deal told Reuters.

Chinese companies have been steadily making acquisitions in Europe over the past few years but state-owned enterprises, which are slowed by often dense public bureaucracy, have lagged more nimble private sector companies in sealing deals.

Banking sources say that in the oil and gas sector, for example, asset purchases by state-owned enterprises can sometimes take one to two years.

But state-owned ChemChina was able to stitch together the KraussMaffei deal in just a “few weeks”, according to several sources familiar with the matter.

The deal saw the consortium of ChemChina, Guoxin International Investment Corp and AGIC buy the German firm from Canada’s Onex Corp. ChemChina will take two-thirds of KraussMaffei, with its partners sharing the rest.

Cai was instrumental in connecting the various parties together, and negotiating the deal to a tight-deadline, said the sources. He worked closely with Ting Cai, the CEO of China National Chemical Equipment, the ChemChina unit involved in the deal, they said.

As part of the courtship, senior KraussMaffei management were brought to China and introduced to local government officials and potential customers, to showcase the scale of businesses opportunities, according to the sources.

“He is brilliant at bringing the hi-tech (industry) and the Chinese market potential together,” said one of the sources. “He always has a million ideas.” (Additional reporting by Elzio Barreto in Hong Kong; Editing by Pravin Char)

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