Baosteel, Warburg Pincus buy Chinese gas assets

Shanghai Baosteel Gases and Warburg Pincus are buying Chinese industrial gas assets for $488m in a partnership designed to seek investment opportunities as China reforms SOEs.
A Baosteel Gases factory
A Baosteel Gases factory

China’s Shanghai Baosteel Gases and global private equity firm Warburg Pincus said on Tuesday they have agreed to buy industrial gas assets from state-controlled Henan Jinkai Chemical Investment Holding for Rmb3 billion ($488 million).

The deal is the first fruit of a partnership between Warburg Pincus and Baosteel Gases aimed at helping the Chinese firm grow and the New York-based private equity firm to seize investment opportunities as China reforms its state-owned enterprises. 

“We look forward to working with the Warburg Pincus teams to further expand and deepen our footprint in the industrial gas field at home and abroad,” said Sheng Zhongke, chief executive of Baosteel Gases, in a statement.

Established in 2008, Baosteel Gases is a wholly owned subsidiary of Baosteel Metal, which in turn is part of state-owned Chinese steel conglomerate Baosteel Group.

Baosteel Gases is active in a variety of industrial gases, synthetic gases, packaged gases and new energy, operating through more than 10 subsidiaries in China’s eastern, northwest and southern regions.

Since entering the Chinese market in 1994, Warburg Pincus has invested more than $4 billion into Chinese companies. The firm has invested more than $14.7 billion in over 110 energy and industrial companies.

China’s move towards a so-called “mixed ownership” structure and the government’s push to introduce private capital into its state-owned enterprises has opened up an opportunity for private equity firms.

President Xi Jinping first unveiled his plan to court private investment at a Communist Party leadership gathering in November last year. Asset sales at centrally governed financial and industrial giants quickly followed. Beijing-based conglomerate Citic Group sold 16% of its capital to 27 institutional investors after injecting $36 billion of its assets into a Hong Kong-listed entity.

David Li, managing director of Warburg Pincus, responsible for the firm’s investment activities in Asia, said the private equity firm was keen to “participate the on going Chinese SOE reforms, in the backdrop of the economic structure transformation and deepening reform in China”.


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