Investing in surveillance in a surveillance state like China pays well for KKR and its pension fund investors.
KKR Asia Fund III sold a portion of its stake in Chinese surveillance company Cue Group to Baring Private Equity Asia in November 2021, receiving $275.3 million in connection with the transaction, according to recent filings in China and Singapore.[1] That figure represents a significant premium to KKR’s original investment of $126 million, providing evidence that surveillance pays.
Cue develops surveillance technology for public and private sector uses, including marketing applications.
Following the Baring transaction, KKR Asia Fund III entities received a $235 million dividend in 2021, and KKR valued their remaining Cue stake at $215 million at year end 2021.[2]
Singapore Corporate Registry, filed 7/26/2022
That dividend will allow KKR Asia Fund III to return profits to its investors, including public pension funds like Florida State Board of Administration, Texas Permanent School Fund, Washington State Investment Board, Oregon Retirement System, Michigan Treasury, and Public Safety Personnel Retirement System of Arizona.
It will also likely allow the fund to pay carried interest to KKR on this investment.
Cue’s surveillance business included the CUE Real-time AI Facial & Body Temperature Detector used for pandemic surveillance, its smart retail product that included facial recognition, emotion detection and customer tracking in stores and online, and the CUE-branded autonomous vehicle which Cue described as being suitable for public security and military uses. According to an October 28, 2020 Xinhuanet article,
“CUE Group’s CEO Shi Kan indicated that, CUE Group’s business covers the area of digital marketing, however, in essence, the DNA of its business comes from big data and artificial intelligence technology, CUE Group is essentially a digital technology company. At present, AI business has already constituted an important part of the Group’s continuous efforts.”[3]
http://www.xinhuanet.com/info/2020-10/28/c_139470907.htm
According to Pitchbook, KKR sold the stake to Baring Private Equity Asia Real Estate Fund II, a fund with a substantial portion of its investments in information technology, despite its real estate moniker.[4]
[1] State Administration for Market Regulation Publicity Form for Simple Cases of Concentration identifies Baring as acquiror of “partial stake” and “joint control”; Sino Ad Ultimate Pte Ltd 2021 Financial Statement identifies $275.3 million from “investee”; Pitchbook identifies BPEA Real Estate II as the acquirer.
[2] Singapore Corporate Registry, Sino Ad Ultimate Holdings Pte. Ltd. Financial Statements for 2021, p. 23.
[3] http://www.xinhuanet.com/info/2020-10/28/c_139470907.htm [Google translate, with the letters DNA in the Chinese original]
[4] Pitchbook, BPEA Real Estate Fund II Fund Profile, downloaded 8/19/2022.