When Byeon Yang-Ho staged a breakfast meeting in June last year to announce with some pride the launch of South Korean private equity startup business Vogo, his timing seemed highly opportune.
While statistics showed domestic limited partner appetite for the asset class beginning to grow, foreign investors were at the same time starting to attract the kind of negative press headlines that have since proliferated as a result of quick, outsized profit-making and, in certain cases, alleged tax evasion. Homegrown funds looked set to prosper as paranoia spread about the motives of ‘outsiders’.
Few private equity professionals were more woven into the fabric of the South Korean business community – and hence more trusted – than Yang-Ho, thanks to his 27-year stint in the country's finance ministry where he was responsible for overseeing a succession of high-profile state asset sales.
Unfortunately, one of those sales appears to have been his and his firm's undoing (whether permanently or temporarily remains to be seen). Yang-Ho has been called up for questioning by South Korean authorities over the controversial sale of Korea Exchange Bank to US private equity firm Lone Star in 2003. Lone Star – which has subsequently been cleared of any misdemeanours – allegedly acquired KEB on the cheap after its capital adequacy ratio was wrongly calculated.
Jason Shin, a fellow partner at Vogo and former head of investment banking for Morgan Stanley in Seoul, is also being quizzed by prosecutors with respect to the same transaction.
As a result, Vogo's fundraising – which was living up to expectations by drawing strong interest from local institutions – has been halted. There is no official word as yet regarding when the process will recommence. The fund, which had a final target of $1 billion (€780 million), had at the time of its suspension drawn over $600 million in commitments. Whether the firm will one day be in a position to deploy its capital any time soon remains, for the time being, a matter of conjecture.
CARLYLE RAISES LARGEST JAPAN BUYOUT FUND
Global private equity firm The Carlyle Group has closed its second Japanese buyout fund on ¥215.6 billion (€1.5 billion; $1.9 billion). The fund is the largest private equity vehicle dedicated to Japan to date. The closing comes on the heels of Carlyle's pan-Asian growth fund, which closed on $668 million in June, and ahead of a final closing on a pan-Asian buyout fund, which is expected to raise over $1.5 billion. Carlyle Japan Partners II is more than four times larger than its predecessor, which closed in 2001 on ¥50 billion. According to a Carlyle spokesperson, Carlyle Japan Partners I is almost fully invested after seven investments in sectors spanning healthcare, industrial, automobile, business outsourcing, media and communications. Japanese investors contributed approximately half of commitments to Fund II, Carlyle said in a statement.
TEXAS PACIFIC RECRUITS TOKYO HEAD
Jun Tsusaka has joined Texas Pacific Group as a partner in its Tokyo office. He will have lead responsibility for building TPG's local operations and guiding the firm's strategy in Japan. A Japanese national, 45 year-old Tsusaka co-founded US buyout firm Brera Capital in 1997 and served for a number of years as managing partner of the Stenbeck Group family office. Prior to that, he was an M&A banker at Goldman Sachs in New York.
KKR MAY RAISE SEPARATE ASIA FUND
US buyout firm Kohlberg Kravis Roberts has told limited partners it may raise a separate Asia-focused private equity fund next year. The firm has told an LP that it may raise as much as $2 billion for the vehicle. A separate LP source confirmed KKR's hopes to raise an Asia fund, but was told only that the firm would seek at least $1 billion. KKR is currently in the market with its 2006 Fund, which is targeting well in excess of $10 billion.
TEMASEK LEADS $245M ROUND FOR EMOBILE
Singapore's Temasek Holdings is the lead investor in an equity financing round to inject an additional ¥27.3 billion ($244.5 million; €189 million) of new capital into eMobile, a wholly owned subsidiary of Japanese broadband operator eAccess. As part of the financing, Temasek invested ¥12 billion in the business for an equity stake of around 7 percent, making it the third largest shareholder, after eAccess (46.2 percent) and Goldman Sachs Group (24 percent).
BABCOCK & BROWN BUYS POWER ASSETS
Babcock & Brown has acquired 100 percent of the issued share capital and shareholder loans of NRG Flinders, a company accounting for over 50 percent of the energy produced in South Australia. Babcock & Brown is investing approximately A$317 million ($237 million; €183 million) in the deal, which is subject to certain conditions. The enterprise value of the business is A$513 million. The acquisition value represents a 2005 EV/EBITDA multiple of approximately 11.8 times. NRG Flinders' EBITDA in the year to 31 December 2005 was A$43.5 million.
KKR SETS AUSTRALIAN BUYOUT RECORD
Kohlberg Kravis Roberts has made waves with its first Australian buyout, winning a A$1.83bn ($1.35bn) auction to acquire the waste management businesses of Brambles Industries, a global support services group. Sydney-based rivals have called KKR's successful bid ‘aggressive’ compared to local expectations of a A$1.6bn to A$1.7bn price tag. Three other contending bids came from Ironbridge Capital and CVC Asia Pacific; CHAMP Private Equity and trade partner Transpacific Industries Group; and CCMP Private Capital Asia, in partnership with Tenix, an engineering firm.
MACQUARIE, TPG-NEWBRIDGE IN PCCW BIDDING WAR
Australia's Macquarie Bank and TPGNewbridge are targeting the telecommunications and media assets of Hong Kong-listed PCCW, a company controlled by Richard Li, the son of Hong Kong tycoon Li Ka-shin. PCCW has received non-binding expressions of interest from Macquarie and TPGNewbridge in a “possible acquisition of substantially all the telecommunications and media assets of the company,” according to a statement from Macquarie, which added: “discussions are at a very early stage and it is far too early to predict whether they will result in a transaction”.
MEKONG CAPITAL CLOSES SECOND VIETNAM FUND
Vietnam-based Mekong Capital has held a first and final close for its second private equity fund on $50 million (€39 million). The Mekong Enterprise Fund II attracted 25 investors, 50 percent of whom were private investors that comprised individuals and family offices. The fund also received $9 million from Asian Development Bank, Chris Freund, founder and managing director of Mekong, said in an interview. Approximately 48 percent of the fund comes from Europe, 27 percent the US, and 25 percent Asia.
LIGHTSPEED HIRES CHINA TALENT
Silicon Valley-based Lightspeed Venture Partners has hired Shanghai native Ron Cao to build the early stage-focused VC firm's investment activities in China. Cao joins Lightspeed as a partner and will continue to be based in Shanghai, where he will play a lead role in pinpointing and building up Chinese companies within the communications, Internet, wireless and semiconductors sectors. Prior to his recruitment by Lightspeed, Cao served as managing director of KLM Capital, an early stage venture firm based in Silicon Valley and Hong Kong.
CANAAN OPENS IN INDIA
US-based VC Canaan Partners has established a presence in India, with the opening of an investment office in Gurgaon – less than 30 kilometres from the Indian capital of New Delhi and one of the most rapidly developing cities in the northern part of the country. The Gurgaon office will be led by Canaan India executive director Alok Mittal, an Indian entrepreneur who co-founded India's largest job-post site JobsAhead.com which was sold to Monster.com in May 2004. The activities of Canaan's newly established investment office in India will initially be directed toward Internet and wireless investments.
SEARCH GROUP TO RAISE $200M ASIAN FOF
Hong Kong-headquartered Search Investment Group has announced plans to raise third party capital for an Asia-focused private equity fund of funds. The fund, to be closed by the end of the year, has a target size of $200 million. Established in the early 1970s, Search is the private investment firm of Robert W. Miller, co-founder of Duty Free Shoppers, the retailer now co-owned with LVMH of France. The firm has invested in alternative assets globally for the past two decades.
PAKISTAN TO GRANT TAX EXEMPTION
Private equity firms in Pakistan have been boosted by a report that profits made by their funds will be exempt from taxation for up to ten years. According to Pakistan's Daily Times, the Securities and Exchange Commission of Pakistan (SECP) has put forward budget proposals to Pakistan's Central Board of Revenue (CBR) that would grant all profits and gains from private equity funds and venture capital investments exemption from taxes, including withholding taxes, for up to ten years, depending on the life of a fund.