HONG KONG -- CEFC China Energy, a Chinese conglomerate with big investments in oil in central Africa, agreed on Wednesday to buy a stake in a century-old New York boutique investment bank, the Cowen Group.
For Cowen, the deal brings an injection of cash and debt financing and the promise of better access to the Chinese market. CEFC gets a springboard into high finance in the United States.
Previous attempts by Chinese companies to penetrate American financial services have come under regulatory scrutiny or struggled to generate hoped-for financial returns, though Cowen's chairman, Peter Cohen, said he viewed his deal as "pretty benign" from a regulatory standpoint.
A decade ago, the China Investment Corp., China's sovereign wealth fund, bought a stake in Morgan Stanley, a deal that signaled a shift in the investment strategy of organizations with links to the Chinese government away from domestic acquisitions to overseas purchases.
Last month, Deutsche Bank disclosed that the HNA Group, a private Chinese firm that invests in airlines and hotels around the world, had acquired a 3 percent stake, worth about $1 billion at current share prices. In January, HNA acquired the investment business SkyBridge Capital from Anthony Scaramucci, who was being considered at the time for a job as a business adviser to President Donald Trump but who did not ultimately get the position.
Cowen, an investment bank founded in 1918, said Wednesday that it had agreed to sell a 19.9 percent stake in itself to CEFC. The deal includes the sale of the stake -- priced at $100 million, equivalent to a 29.5 percent premium to Cowen's closing price on the Nasdaq on Tuesday -- as well as a separate agreement by CEFC to extend debt financing to Cowen worth $175 million.
The two companies said in a statement that they wanted to use complementary areas of expertise and geographical focus to expand Cowen's core equity, research and investment banking businesses.
The purchase requires regulatory approval and the green light from the Committee on Foreign Investment in the United States, a panel composed of representatives from major U.S. government departments and intelligence agencies like the departments of Treasury and Justice and the CIA.
Cowen executives said that because the deal involved only a minority stake and was focused on financial services, not normally seen as a sensitive industry, they were confident it would pass muster with U.S. regulators.
"We're not a defense contractor or technology business or chip maker," Cohen said in a telephone interview from Shanghai. He said because CEFC would take a minority stake, the management of Cowen would retain "complete autonomy in the day-to-day running of the business."
CEFC has risen rapidly in Chinese energy and finance -- two industries dominated by government interests -- since it was founded in 2002 by Ye Jianming. Currently the firm's chairman, he started the company when he was still in his 20s.
Business on 03/30/2017