TOKYO: US hedge fund Cerberus is exploring opportunities to help fast-growing Chinese and Indian firms make acquisitions abroad, said its chairman, former US Treasury Secretary John Snow.
Cerberus Capital Management LP, which has a mandate to invest across all asset classes and sectors globally, believes in China it could add significant value at state-owned enterprises.Cerberus already has a presence in Japan and Taiwan, and is in the process of setting up an office in Hong Kong. Longer-term it may set up offices in Beijing and potentially India.
“Over time we hope to have a good footprint in India and China, probably China first,” Snow said in an interview with Reuters.Snow has visited China in recent weeks and will return over the coming months. He also plans to travel to India later this year.
China’s companies are keen to spread their wings abroad but several big deals, such as Chinese oil major CNOOC Ltd.’s acquisition of US energy producer Unocal, have run aground during the US approval process.
The value of Asia Pacific companies acquiring US firms is already running at $7.3 billion, nearly neck-and-neck with the 2006 total of 7.6 billion, and up from a recent low of $1.1 billion in 2003, according to data providers at Thomson Financial.Snow, an experienced politician and well-known name in Asian political circles, hopes to help smooth the way for Cerberus’ co-investors.
“In the case of investments in the United States, we would bring a real understanding and sensitivity to the process. We know the rules of that game that could help co-investors avoid legal barriers,” said Snow, who plans to visit Asia three or four times a year.Cerberus hopes to compete with other funds eager to invest in China by aligning its interests with those of the Chinese government.
“What are China’s objectives?” Snow said. “Well, modernise management practises, reduce the number of state-owned enterprises and make sure they create jobs.”The firm can bring about 125 operating executives, plucked from highest echelons of corporate America, to bear on improving the target company’s performance and hence boost employment.Snow, prior to becoming treasury secretary in February 2003, was chief executive of US railroad company CSX Corp.
Cerberus is the latest in a string of large US funds to set up shop in Hong Kong. In January, both the Blackstone Group and Providence Equity Partners made big-name hires to boost deal-making in Asia.
Consequently, many players in alternative investment fear that too much capital is chasing too few deals, artificially inflating prices and creating a bubble.Snow noted that Cerberus can invest in anything from auto financing to housing, so it will be well placed when the bubble bursts.
Cerberus began as a small hedge fund, focussing mainly on distressed debt investing, and about five years ago it added a private equity practise to its array of strategies.
Now Cerberus has about $22 billion under management, $8-10 billion of which is invested in Japan. Last year Cerberus led the acquisition of a majority stake in General Motor Corp.’s finance arm GMAC, alongside one of its Japanese portfolio companies, Aozora Bank Ltd.Investors in New York-headquartered Cerberus include state and corporate pension funds, insurance companies, foundations and endowments.
Snow joined Cerberus in October, one in a train of politicians moving to hedge funds. Cerberus also boasts former US Vice President Dan Quayle as chairman of Cerberus Global Investments, a division of Cerberus Capital Management.Another former U.S. treasury secretary, Lawrence Summers, who served in the Clinton administration, became a managing director at $25 billion D.E. Shaw & Co..
Snow, who was also an appointee in Gerald Ford’s administration in the mid-1970s, followed that stint in government with about 25 years in the private sector before returning to public service in George Bush’s government.Snow, 67, said the revolving doors must be very slow moving, and given his track record he would be back in government in another 25 years.