Feet firmly on ground

One of Europe's largest private equity companies is set to enter the China market.

Terra Firma, which is based in London and manages $30 billion of assets, received regulatory approval from the Chinese authorities earlier this month to open a Beijing office.

The company, which is chaired by Guy Hands, one of the best known figures in the private equity market, is looking to make major investments in China, particularly in sectors like social housing, agriculture and new energy.

Shi Bo, who will head the operations in Beijing as chief representative, says the company is looking for major investments between 300 and 500 million euros.

"We tend only to do relatively large deals and tend to take a control position in whoever we invest in. Deals of this size are relatively difficult to come by," he says.

Terra Firma has been involved in a number of high profile deals in Europe, including the purchase of the EMI Group, which owns The Beatles' back catalogue, for 2.9 billion euros in 2007. Its involvement in the company has now ended after a legal dispute with Citigroup, which financed the deal, was settled earlier this year.

It also owns Annington Homes, which is the largest residential landlord in the UK with 60,000 properties.

Shi says the aim of the company is to do something similar in China, where there is a big need for social housing.

"One possible opportunity for us is to work with a major Chinese real estate developer to leverage our knowledge of social housing," he says.

"Local governments in China are very concerned how social housing is managed and they don't want it developed into slums."

Shi, who is from Beijing, has spent much of his life overseas, including studying engineering at Cornell University in the United States and a spell at Citigroup. He will head a team of up to six people in Beijing.

One possible target area in China will be cinemas. Terra Firma was a player in the merger of Odeon and UCI cinemas in Europe.

"Cinemas have big growth potential in China. They are very profitable and their margins are very healthy," says Shi.

Terra Firma will look to find synergies with some of its existing businesses in its portfolio and to fund joint ventures with Chinese partners.

These could be in agriculture with one of its businesses being CPC, the second largest beef producer in Australia, and also in new energy with the company being an investor in EverPower, the American wind energy development company.

Hands, who is chairman and chief executive, says there are many possible opportunities in China.

"The establishment of a China office is a testament to our confidence in the business opportunities in China and our commitment to long-term cooperation with Chinese companies," he says.