By Scott Murdoch and Kane Wu
SYDNEY/HONG KONG (Reuters) - Private equity firm Hillhouse Capital Group has offered to make concessions in its purchase of Australian medical researcher George Clinical to gain regulatory approval after an unusually long review, said two people with knowledge of the matter.
Hillhouse will retain Australian directors and keep data onshore to win over the Foreign Investment Review Board (FIRB) which is focusing on its Chinese links among other issues, said the people, declining to be named when discussing confidential information. Hillhouse has argued it is a global fund, they said.
Hillhouse did not respond to Reuters' requests for comment. Its website does not detail where the firm is domiciled but shows it has employees in Beijing, Hong Kong, Singapore, London and the United States. George Clinical declined to comment.
The Department of the Treasury, which oversees the FIRB, would not comment on specific transactions but said the government reviews foreign investment proposals on a "case-by-case basis to ensure they are not contrary to Australia's national interest and, where relevant, are consistent with Australia's national security".
Hillhouse's bid for its first Australian asset comes as relations between Australia and China begin to improve after a series of disagreements and trade restrictions - albeit against a backdrop of heightened Western concern over China's increasing technological and military clout on the global stage.
The private equity firm has entered a deal to buy most of George Clinical, the clinical research organisation said in December, adding the transaction was subject to FIRB approval.
George Clinical did not disclose a sale price but said its parent, the George Institute, a medical research group, would retain an undefined stake.
FIRB typically responds to acquisition proposals within 90 days, said bankers and advisors who regularly communicate with the regulator.
One of the areas of regulatory focus is Hillhouse's Chinese links, said the two people and a third source.
Founded in 2005 by Chinese rainmaker Zhang Lei with seed funding from a Yale University endowment, Hillhouse is known for early investments in Chinese technology giants Tencent Holdings (OTC:TCEHY) Ltd, JD (NASDAQ:JD).com Inc and Baidu Inc (NASDAQ:BIDU).
It has significantly expanded investment outside of mainland China, spending $15.6 billion on acquisitions globally in the past two-and-a-half years, showed data from Refinitiv.
In March 2021, it agreed to buy the household appliance arm of the Netherlands' Koninklijke Philips (NYSE:PHG) NV for 3.7 billion euros ($3.95 billion), its largest overseas acquisition.
The George Clinical deal would involve the holding of healthcare and patient data which is considered sensitive in Australia. Hillhouse has offered to ensure data remains onshore and not be shared overseas, the people said.
It has also offered to keep some Australian directors on George Clinical's board once the transaction is completed, they said.
The deal could be a test of appetite for the foreign purchase of assets in Australia, which has been one of the most active merger-and-acquisition (M&A) markets in the Asia-Pacific region in recent years amid sluggish activity elsewhere.
In 2022, announced M&A volume in the country was worth $145.2 billion, down from $384.2 billion in 2021, but up 56% from 2020, Refinitiv data showed. Australia is one of the busiest M&A markets so far this year with $58.3 billion worth of deals announced in the first five months, the data showed.
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