Sunday, April 28, 2013

Chinese PEU Stories

Not every private equity deal turned to gold in China.  Sure, The Carlyle Group's investment in China Pacific Life ended up a ten bagger, but other PEU's have not had similar luck.  South China Morning News ran a series of articles on PEU investments, the kind that won't be found at the bottom of a raiinbow:

Chinese PEU investments aren't yet dog food or infant formula, both tainted with toxic melamine by Chinese manufacturers.  Ironically, Carlye invested in Yashilli, an infant formula maker, with an aim to produce high quality, i.e. safe baby milk.

Despite Carlyle's best efforts, even poor Chinese parents find a way to import baby formula.

"If China cannot even handle baby food, what can we trust?"

It seems Carlyle's quality promise didn't change things for many Chinese citizens.  However, New Zealanders might be happier given Yashili's plans to build a $100 million infant formula plant in their country..

Private equity and China's central planners have much in common.   Neither are worthy of trust.