WEDC attracts $100 million from Chinese private equity company

Wisconsin has secured $100 million in foreign direct investment from Chinese private equity firm PiYi Investment Management Co. Ltd.

The investment, which will be spread in $2 to $15 million allotments among up to 25 companies across the state, is only an initial step from PiYi. The company will explore other potential investments nationwide during an upcoming U.S.-China Investor Week tour it is hosting in cooperation with the Council of American States in China (CASIC).

Wisconsin Economic Development Corp. (WEDC), the entity that replaced the state Department of Commerce, is seeking applications for growth investment from PiYi, and will choose the top 25 candidates to present to PiYi on the tour, said Scott Mosley, manager of foreign direct investments for the WEDC.

“When we look globally, there are not many large pools of untapped capital left in the world,” Mosley said. “This represents WEDC’s first effort to engage with international institutional capital.”

China is one of those untapped pools of money that’s beginning to form and move offshore, Mosley said. PiYi approached WEDC with the plan to invest in Wisconsin companies after CASIC president Paul Swenson, a Wisconsin native, mentioned the opportunities available.

Because of the WEDC’s private setup, Wisconsin is the only state on the tour that has already secured funding from PiYi, Swenson said.

PiYi is looking at equity placement designed for portfolio diversification, he said. They may work with fund managers who would be the lead general partner for an investment.

“The primary goal of the investment is to take trailing or minority shares,” Swenson said.

Chinese investors have shown increased interest in foreign direct investments recently with the Chinese government’s encouragement. The Chinese “going out” policy was recently implemented to drive outward international investment and private partnership laws have also been reformed, Mosley said.

“There have been a number of structural changes that have occurred in China in the past few years that have induced investors in China to move their money overseas,” Mosley said. “We have contacts in China and we’re able to connect with this company that is sponsoring the U.S.-China Investor Week.”

The 10-day tour will begin in Dallas on Sept. 20. Then the 125 Chinese investors, analysts and government officials will split into two groups. One group will visit Los Angeles and Portland, while the other will stop in Orlando, Milwaukee and Madison.

Wisconsin is an attractive investment option because of its concentration of high growth businesses in manufacturing, clean technology, environmental remediation and medical devices, Mosley said. PiYi is looking for companies that have commercialized technology, a product on the market and cash flow, not start-ups.

“In addition to the high growth companies, nationally Madison and Milwaukee have a growing reputation for an extremely high quality workforce, for some extremely innovative technologies in clean energies, in research and development and the reputation of the UW system,” he said.

PiYi’s $100 million investment has a parallel fund in China for companies planning to expand there as well, though that’s not a requirement for candidates, Swenson said. There is also potential for additional investment in Wisconsin after PiYi visits.

Swenson’s international trade and investment consulting company, The China Hand Consulting Co. Ltd., advised Wisconsin from 2003 to 2012 on export promotion efforts, but shifted its office about a year and a half ago to attracting investments after it saw the transition in Chinese investors.

“In the past, our primary responsibilities for the state had always been on the trade side,” Swenson said.

WEDC has also been focusing on attracting foreign capital and companies who want to set up in Wisconsin, Mosley said.

“One of the major issues that we are trying to add at WEDC is Wisconsin has historically had a lack of at-risk capital,” Mosley said. “We are exploring a number of different strategies to bring capital across a continuum of needs.” n

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