EMERGING EXITS

Given the recent stock market corrections in many emerging markets, it is not surprising that private equity-backed companies in these regions are frequently choosing the M&A route to liquidity, even if they are well down the road with a planned IPO. Just as well for these firms that interest from trade buyers is growing fast.

Take, for instance, the case of Brazilian media company Abril Group. Abril stated in April 2006 its intention to go public, but then announced in May that South African media group Naspers was buying 30 percent of the company for R2.7 billion (€346 million; $442 million). Among the investors selling their shares in Abril was global emerging markets private equity firm Capital International, which unloaded the 13.8 percent stake it had acquired in mid 2004 via a $50 million-plus deal.

Waco International is another example of a private equity-backed company whose gaze was diverted from an IPO exit toward a sale. The South Africa-based building services company had considered listing on the Johannesburg Securities Exchange last August. But following an announcement in September of interest from potential acquirers, Waco was purchased in early 2006 by private equity firms CCMP Capital Asia and JPMorgan Partners in a deal valued at ZAR5.4 billion (€740 million, $897 million) from a consortium led by South African firm Ethos Private Equity, which had bought out the company for ZAR2.4 billion in 2000.

Pan-African mobile communications services provider Celtel International was sold to Mobile Telecommunications Company (MTC) of Kuwait last year, having also considered going public on the London and Johannesburg stock exchanges. At the time Celtel was contemplating a public listing, it was estimated to be valued between $1.75 billion and $2.1 billion based on expected share price – significantly less than the $3.36 billion the company reaped from its sale to MTC. The sale returned roughly $2 billion to its private equity backers, which included Actis, Capital International, EMP Africa and the International Finance Corporation, among others.

That the windows for exits can be much narrower in some of these markets than in their developed counterparts may influence portfolio company valuations – but given the continuing demand from corporate buyers seeking to extend their reach into new markets, liquidity in general is less of a worry for GPs owning best-ofbreed companies.

MEXICO'S FAMSA GOES PUBLIC
Monterrey, Mexico-based furniture and household goods retailer Grupo Famsa has raised $230 million (€182 million) through an initial public offering on the Bolsa Mexicana de Valores. The IPO was more than 11 times oversubscribed. Approximately 30 percent of Famsa's stock was sold at $2.36 per share. Selling shareholders included Monterrey Venture Holding – an affiliate of General Electric Pension Fund – and Tapazeca, an affiliate of Soros Fund Management. The company will use the proceeds from the share offer to pay down its debt and fund expansion. Underwriters for the IPO included Credit Suisse, BBVA Securities and UBS Investment Bank.

ADVENT LEADS MILANO LBO
Global private equity firm Advent International has led a consortium to acquire Mexico's largest discount clothing retailer Controladora Milano through a $200 million (€159 million) leveraged buyout. The 100 percent stake in Milano was acquired from an investor group led by private equity firm Newbridge Latin America, which acquired the company in November 1997. Advent's co-investors included Capital International, BBVA Proyectos Empresariales and the Netherlands Development Finance Company. The transaction was structured with $110 million in equity and $90 million of debt, and represents “Mexico's first private equity-backed transaction in the middle market to use significant leverage based mainly on cash flow”, according to an Advent press release.

NBD APPOINTS INVESTMENT BANKING CEO
The National Bank of Dubai (NBD) has appointed Shahzad Shahbaz as chief executive of NBD Investment Bank Limited. Shahbaz will be in charge of setting up NBD's investment banking, asset management and private equity business. Most recently, Shahbaz was at the London office of Bank of America, where he served as regional head for the firm's global investment banking activities in Continental Europe, the Middle East and Africa (EMEA).

GLOBAL SELLS STAKE IN JORDANIAN MOBILE COMPANY
Kuwaiti investment bank Global Investment House has sold its stake in Umniah Mobile Telecommunications, a Jordanian mobile telecommunications company, to Bahrain Telecommunications Company (Batelco). Global acquired its 14 percent interest in Umniah last September, alongside other Kuwaiti investors. A Global press release stated that, according to the sale agreement, Batelco is to acquire 96 percent of Umniah through a KWD120 million ($415 million, €328 million) deal. Global is expected to earn a net profit of KWD7.5 million through the transaction.

PE CONSORTIUM BUYS CHILEAN TRANSMISSION FIRM
Chilean power transmission company HQI Transelec Chile has been acquired by an investor group led by Canadian power, real estate and infrastructure company Brookfield Asset Management. The group also includes Canada Pension Plan Investment Board, British Columbia Investment Management Corporation, and another institutional investor. The Brookfield consortium is acquiring 92 percent of Transelec in a $1.55 billion (€1.22 billion) deal from Hydro-Quebec International and is in separate negotiations to purchase the remaining 8 percent of the company. In a press announcement, CPP Investment Board's vice president of private investment Mark Wiseman stated that CPP had committed up to $350 million to the transaction, representing the pension fund's “largest infrastructure investment to date”. Transelec is the largest electricity transmission company in Chile.

STRENGTHENING RETURNSRecently updated data from Cambridge Associates' Emerging Markets Private Equity Index – provided to EMPEA – reveal that returns for the asset class are strengthening. The index includes ‘institutional quality’ funds and is meant to approximate benchmark net-to-investor returns by vintage year and region. The benchmarking project is a collaboration between Boston-based investment management consultant Cambridge Associates and the Washington DC-based Emerging Markets Private Equity Association.

Cambridge Associates Emerging Markets PE Index Dec 31, 2005 Data
1 Yr 3 Yr 5 Yr 10 Yr
EM VC & PE Index 21.87 19.24 4.95 4.06
Asian PE Index 13.78 16.47 5.06 3.67
CEE Russia PE Index 50.26 30.58 15.34 10.25
Lat Am PE Index 14.71 10.95 -6.81 -3.62
US PE Index 27.35 24.93 10.07 13.37
US VC Index 7.9 7.3 -9.89 39.34
W. Eur PE Index 24.7 28.42 19.91 21.13
MSCI EM Index 34.54 38.35 19.44 6.98
S&P 500 4.91 14.4 0.54 9.07