Carlyle in China hotel deal

Carlyle has become the largest shareholder in a China-based mid-market hotel chain on behalf of an Asia private equity fund.

The Carlyle Group has acquired a controlling stake in China-based Mandarin Hotel Holdings, according to a company statement.

The purchase gives Carlyle a 49 percent stake, which makes it the largest shareholder, the firm said.

The amount of investment was not disclosed. But the Mandarin deal is from the Carlyle Asia Partners III fund, which has an average deal size of $75 million, according to a Carlyle spokesman.

Eric Zhang, managing director of The Carlyle Group, will become co-chairman of the company.

Mandarin manages a mid-market hotel chain in China under the brands of Crystal Orange Hotel and Orange Hotel and operates in six major cities.  

“We are confident in the growth potential of Crystal Orange Hotel and Orange Hotel as well as the mid-market hotel segment in China,” Zhang said in the statement.  “With our expertise in the hotel industry, we will support the company’s continuous improvement, maximize its full potential and take it to the next level of market penetration and customer satisfaction.” 

Carlyle to date has invested approximately $4 billion in more than 60 deals in China. This year, the firm expects more deals in China due in part to falling valuations, according to the spokesman.

China deals indeed seem to be picking up as public market valuations fall. CVC Asia Pacific closed three China deals in the last six months: An $80 million stake in AHCI, a large retailer of pharmaceutical and health products; a $110 million investment in Venturepharma, a pharmaceutical company; and a $100 million investment in retail footwear company C.banner. 

Roy Kuan, head of Asia and Japan for CVC Asia Pacific, commented: “The deals we’re doing in China now are at very sensible multiples. If we had invested there in 2010, we would now be underwater.”