Why the China rainmaker just won’t go away I The ins and outs of mandate hunting I
Lee Zhang: at the top of the Deutsche tree I Fang Fenglei and Fred Hu: one bank, two rainmakers I Zhang Liping and Janice Hu: quietly getting deals done
A colleague at UBS refers to him as the "grandfather of the private sector in China", and the mainland banker spends more time pounding the pavements of Shanghai and Guangdong meeting entrepreneurs and company owners than cozying up to mandarins in Beijing.
Yet until even two years ago, the 52-year-old Shanghainese-speaking banker would have been no one’s idea of a rainmaker.
That characterization was until recently reserved for such people as Merrill Lynch’s Erhfei Liu, Deutsche Bank’s Lee Zhang or the peripatetic Margaret Ren – bankers who could land roles on the big-ticket stock sales of state-owned enterprises such as China Telecom, PetroChina, and China Life Insurance, simply by turning up and shaking a few hands.
China has moved on since then. These days any foreign investment bank worth its salt is vying to position itself as a corporate financier to the country’s ambitious privately owned firms.
Few, however, can boast Cai’s contacts or influence. When UBS hired him from BNP Paribas in March 2006 as its new chairman of investment banking China, it tapped directly into a rich vein of private sector offerings. Since joining, Cai and a team of six bankers who joined from BNP have won at least four IPOs, worth $1.24 billion, including hotel group Shanghai Jin Jiang, Dalian Port and Haitian International Holdings. Another major private sector stock sale, the $353 million IPO by Huiyuan Juice in February 2007, was also secured by Cai and his team.
As a further measure of Cai’s impact, it is important to note how BNP’s star has waned as UBS’s has waxed. Since he left, the only major China-Hong Kong equity deals completed by the French bank were those won by Cai before his departure. The bulk of BNP’s remaining deals over the past year comprise a rather pitiable dribble of follow-on offerings cobbled together by its much-reduced China team, the least of which was a $7 million October 2006 sale of shares for the Hong Kong Economic Times.
Of course, UBS already had a strong investment banking team in place. The bank arranged 27 China-Hong Kong stock sales worth $8.71 billion between March 31 2006 (the date Cai joined UBS) and March 19 this year, according to Dealogic, beating Credit Suisse and Goldman Sachs. It also tops Dealogic’s China-Hong Kong equity capital markets rankings over that period. Another leading China banker, He Di, who has strong connections to government officials in Beijing, and Steven Sun and David Chin, who co-head the bank’s financial institutions group, also have 29 years’ experience at UBS between them.
Cai and his team have taken UBS up a big notch in China. The Swiss bank showed remarkable foresight in hiring a big hitter in the private sector, but then so did Cai when he quit BNP. The French bank has since seen its mainland broking joint venture with Changjiang Securities dissolve. UBS, by contrast, is now in a rare position to underwrite stock sales on the mainland, thanks to a nascent partnership with Beijing Securities.
Cai has not altogether forsaken the state sector. Colleagues at UBS note that he has strong connections to the mainland’s emerging joint-stock and private lenders, notably Minsheng Bank, Citic Bank and Everbright Bank, the last of which is gearing up for a $2 billion to $3 billion Hong Kong initial public offering in the middle of this year.
As a result of years spent visiting regional corporates and authorities that rival bankers deemed a waste of time, Cai also retains strong links to local government officials in out-of-the-way places. One UBS colleague says he can think of "numerous occasions where Cai has introduced us to provincial authorities we otherwise wouldn’t have known".
Cai’s background in the state sector – he spent seven years at state-run Shanghai Petrochemical, a division of Chinese oil major Sinopec, leaving in 1994 – also helps him understand how officials at giant SOEs think and work, former colleagues at BNP Paribas say.
He also embodies a rather neat link between the old and new worlds of rainmaking. His mentor at Peregrine was Francis Leung, often considered the greatest rainmaker China or Hong Kong ever produced. Cai cannot, as Leung once did, conjure up IPO mandates out of thin air but his speciality in the private sector gives him an advantage over many of his peers. Cai makes the rain fall but they are more like April showers, where Leung and co once conjured up storms.
That is fine by UBS. True rainmakers are often more trouble than they are worth, and few investment houses like the names of the lead bankers to outshine their own, highly polished brands. Fortunately, Cai’s ego seems to be in check – by all accounts he is personable, friendly, and driven, with an entrepreneurial spirit that matches his clients.
Given that, it’s unfortunate to end on a sour note, but Cai, although an excellent banker, will probably never win any plaudits for his vocal abilities. Recollecting Cai’s performance at UBS’s Christmas party last year, a colleague notes that for all his talents "he really can’t sing very well. I don’t know what it was he was trying – it was really hard to tell."