Chinese Media Investor Plans To Create $500M Private Equity Fund For China-Focused New Media Investments

Bruno Wu, a Chinese media investor, plans to create a China-focused $500 million private equity fund for investments in the country's new media companies, Wall Street Journal reported on Wednesday.

The new fund will target both Chinese and foreign investors, and will be part of BT Capital, a media and alternative-investment joint venture formed, in July, by Wu and Thomas Middelhoff, a former chief executive of German media firm Bertelsmann AG.

The new fund will invest in small- to medium-sized online, digital media and e-commerce firms that "need China for the next wave of expansion," Wu said in an interview, according to the Journal.

Wu, according to the Journal, said that the new fund will target fast-growing “new age media” companies and intends to offer returns in a shorter timeframe than the normal seven-year period typical of private equity firms.

Wu, and Middelhoff who was ousted from Bertelsmann in 2002, pooled assets with revenues about $2 billon to form BT Capital, Financial Times had reported in July.

The move has come at a time when the media industry in China is going through a consolidation phase with several big companies choosing the mergers and acquisitions route to grow in the world’s most populous country.

The media and Internet segments in China are growing at a rapid rate, and the country is estimated to have more than 600 million Internet users. According to Dealogic, the Chinese media industry has witnessed more than 300 deals worth several billion dollars in the past four years.

Last month, Baidu, China's largest Internet search engine agreed to buy Chinese app-store operator, 91 Wireless Websoft Limited, from NetDragon Websoft (OTCMKTS: NDWTY) for $1.9 billion and, in May, Baidu agreed to pay $370 million for the online video business of PPStream, marking its foray into the Internet-video streaming business.

Meanwhile, cross-border deals between the U.S. and China have risen in recent years, with more than $20 billion in acquisitions announced in 2012, according to a report from TheWrap. A study by law firm Manatt, Phelps and Phillips revealed, according to TheWrap, that Chinese media companies were looking to acquiring larger American companies to meet domestic consumer demand, while U.S. investors targeted smaller and mid-sized Chinese media firms.

Investments in Chinese media are highly regulated by the government and foreign investments in areas such as newspapers and publishing are barred, making it difficult for overseas investors to acquire local media firms. However, several international venture capital firms and private equity investors have invested in the country's media and media related-ventures through offshore routes, the Journal reported.