KKR sees deal opportunities in Indonesia’s produce sector

The firm made its first direct investment in Indonesia in May, snapping up a stake in Japfa Comfeed.

A dynamic economy coupled with favourable demographic trends makes Indonesia an extremely interesting market, says Jaka Prasetya, managing director at global firm KKR.

“Our view is that the market is on track to be one of the top 10 global economies in the next 15 years, which creates great opportunities for alternative investors to provide funding to companies whose businesses are poised to benefit from these trends,” Prasetya told Private Equity International.

KKR made its biggest direct investment in Indonesia in May of this year, acquiring a $81.2 million stake in one of Indonesia’s largest agri-feed companies, Japfa Comfeed Indonesia. The deal was structured through the firm’s affiliate, KKR Jade Investment.

KKR was eager to acquire a stake in Japfa as it sees great potential in agrifeed as Indonesia's rising middle class consumes more and more protein.

“The retail/consumer and food industry is something that we’ve been interested in given our recent investment. We particularly see opportunities around the production of high-quality produce and packaged food and snacks,” Prasetya said.

“With the rising popularity of convenience stores, hypermarkets and department stores, the food they stock will have value. Quick service retail, bakeries and snack foods are all investment opportunities, as there is a trend toward consolidation driven by generational shifts in private ownership and industry leaders.”

KKR started investing in Indonesia in 2013 in food business Tiga Pilar Sejahtera Food. Of the firm’s private equity portfolio businesses, nine have operations in Indonesia and employ over 1,000 people. This includes industrial machinery manufacturer, Gardner Denver; mining-related logistics provider, Bis Industries; and healthcare company, Panasonic Healthcare.

The firm has also provided pro bono technical assistance to Indonesian social enterprise East Bali Cashews, raising more than $2 million in investments to grow the company and increase its social impact.

When asked how Indonesia fits in KKR’s global private equity portfolio, Prasetya said: “KKR is committed to Indonesia in the long term. It’s our aim to be a partner to leading corporates looking to take advantage of the country’s very attractive growth prospects.”

According to data from the Investment Coordinating Board of the Republic of Indonesia, foreign direct investment in Indonesia rose 17.1 percent to IDR 96.1 trillion ($7.3 billion; €6.6 billion) in the first quarter of 2016, compared with the previous year.

There were over two dozen private equity deals worth $432.5 million in 2015, according to data from financial services company Duff & Phelps. Among these are Creador Capital’s $24 million purchase of Bank Index Selindo and Ardent Capital’s $12 million acquisition of online grocer, HappyFresh.

A rise in inbound investments can be attributed to the government’s push for more public spending and higher economic growth.

The Indonesian government recently allowed foreign investors to acquire stakes of up to 49 percent in domestic industries that were previously off-limits, including the rubber industry, transportation, energy, and natural resources. In addition, foreign ownership limits were relaxed in the provision of internet services, airport services, telecommunications, healthcare, and distribution and warehousing.