U.S. Private-Equity Firm Joins With China's Ctrip.com in New Fund

U.S. private-equity firm General Atlantic is joining with China's top online travel agency to start a new investment platform to cut deals capturing China's newfound love of travel.

Ocean Link, formed earlier this year, is being backed by General Atlantic and Chinese online travel market leader Ctrip.com International Ltd. It is starting with an initial $400 million of capital with plans to grow in scale as it finds more deals, its executives told The Wall Street Journal in interviews.

The ambitions of Ocean Link are big, and already bearing fruit. Ocean Link was part of a consortium, including Ctrip and internet giant Tencent Holdings Ltd., that completed a $622 million buyout of China's No. 3 travel-booking website eLong Inc. in May. Ocean Link is leading a buyout of another New York-listed Chinese travel company Qunar Cayman Islands Ltd., which is still ongoing.

Chinese consumers are spending more on travel at home and abroad. Goldman Sachs Group Inc. expects Chinese tourists to spend $450 billion on travel overseas by 2025, nearly double the $250 billion they spent last year.

The new travel-focused investment platform, structured as a private equity vehicle but with a longer-term focus, will count Ctrip Chairman James Liang and General Atlantic's new head of China, Eric Zhang, as board members. Mr. Zhang had previously been a key deal maker at rival Carlyle Group LP. Ocean Link has raised funds in both U.S. dollars and Chinese yuan, giving it the flexibility to go after deals both overseas and within China.

"Travel is a sector that is sizable and growing quickly in China," said Tony Jiang, a partner at Ocean Link, in an interview. "Sector focus is becoming increasingly important in the Chinese private equity world."

The growth of travel spending is powered by young Chinese who are spending a bigger share of their income on small luxuries such as movie tickets and trips. The number of trips taken domestically by Chinese residents rose by 10.5% last year from 2014, according to the China National Tourism Administration. Many are also going abroad for shopping splurges, where the same items from handbags to beauty products are often cheaper than at home.

General Atlantic's Mr. Zhang said Ocean Link will play a role in the continuing consolidation of China's online travel and hotel industry. China's hotel sector remains fragmented and Alex Zheng, chairman of Plateno Hotels Group, will also serve as a partner at Ocean Link.

Ocean Link has gone after a number of smaller deals that might escape the attention of bigger private-equity funds. It has invested 6 million euros in Ruby Hotels, a Europe-based hotel chain aimed at "lean luxury" travelers, who want top quality rooms but are less fussed about other amenities typically offered by five-star hotels. It plans to expand the brand in Asia. Ocean Link has also put money into Mind Education, an operator of tours and summer camps in China.

Started in 1980, General Atlantic has been a major investor focusing on growth companies, including startups, globally. Last year, it was one of the firms that led a $1.5 billion investment in home-rental service Airbnb Inc. that valued the company at $25.5 billion. Within China, General Atlantic made a name for itself by being part of a consortium that invested $350 million in Lenovo Group Ltd., helping to finance the Chinese computer maker's purchase of International Business Machines Corp.'s PC unit in 2005. Since it began making China investments in 2000, General Atlantic has put $1.5 billion into 17 companies.

Write to Rick Carew at [e-mail]

(END) Dow Jones Newswires

August 28, 2016 21:55 ET (01:55 GMT)

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