After the spinout of CCMP Capital Asiain 2005, JPMorgan's activities as a merchant bank operating in Asia Pacific were markedly diminished. Now the bank is rebuilding the platform.
In February, it announced a $750 million capital commitment to a newly created investment group in Hong Kong that will pursue mid-market opportunities primarily in Australia, Greater China, India, Japan and South Korea. According to the bank, “opportunistic” investing in the larger Southeast Asian countries is part of the mandate as well.
There are currently no plans to raise any third party capital for the initiative.
Leading the charge are Varun Bery and John Troy, co-founders of local private equity provider TVG Capital Partners. When joining the bank, the two brought along the entire TVG team but, in addition to making new investments for the bank, “will retain their obligations to conduct and oversee an orderly disposition of the remaining assets of the TVG portfolio”, JPMorgan said in an email.
TVG has a $700 million portfolio of investments in communications, media and technology industries, which continues to be owned by the firm's original investors.
As part of the bank's regional network, Bery and Troy are hoping to tap banking relationships to source deals. The focus will be on non-controlling stakes in the consumer, retail and natural resources industries. The new fund will not invest in real estate or in financial services so as not to conflict with the investment bank or the firm's private equity real estate team.
Asked about the single most exciting opportunity, as well as the greatest challenge for private equity in Asia Pacific today, Bery said: “The two most exciting themes for private equity in Asia are to tap the growing affluence of the middle class and to invest in the leading sectors of the industrial economy that will power the strong GDP growth of the major economies. The biggest challenges are to find credible partners who understand the requirements of private equity and high quality management teams that can compete on a global stage.”
Added Troy: “Both these challenges will diminish as private equity becomes a more important part of the financing structure of Asian companies going forward.”
AUSTRALIA DEVISES SOVEREIGN WEALTH CODE
Australia will increase its scrutiny of sovereign wealth funds, according to media reports. The government has set out six principles to vet investments made by the state investment bodies. The initiative makes Australia the first country to set out how it intends to interact with the controversial state investment firms. The Australian government will in future examine the extent to which funds “are independent from the relevant foreign government,” including whether they operate at arm's length from government and their funding arrangements. Australia will also scrutinise whether the firm pursues clear commercial objectives and maintains good corporate governance practices. It will examine if such investments lead to undue concentration or control in the industry or sectors affected. It will also study the impact an investment might have on Australian tax revenue or government policies, as well as the investment's national security impact. The impact on the target business' activities and its contribution to the Australian economy and broader community will also be examined.
SOUTH KOREAN TRIO ON FUNDRAISING TRAIL
Three South Korean-focussed firms are going on the fundraising trail to raise around W1.5 trillion ($1.6 billion) to invest in the region, according to news agency Reuters. H&Q Asia Pacific, Shinhan Financial Group and Mirae Asset Maps Investments have already received W200 billion from South Korea's National Pension Service. H&Q and Mirae will each attempt to raise around W500 billion to W800 billion in the first half of this year. The firms are allowed to raise up to W1 trillion each by the National Pension Service. A third of the money may be invested beyond Korea. The country has had an uneasy relationship with some private equity firms. US buyout firm Lone Star was found guilty of the stock price manipulation of the credit card division of the Korea Exchange Bank earlier this month. The court sentenced its Korea country head Paul Yoo to five years in prison and fined the firm W25 billion.
BLACKSTONE BACKS INDIAN LOGISTICS FIRM
The Blackstone Group has agreed to purchase a 10.4 percent minority stake in Indian logistics operator Allcargo Global Logistics for $60 million. The company said Blackstone's investment will be a mix of equity shares purchased at 934 rupees each as well as debentures and warrants, both of which are convertible to equity shares within or upon completion of 18 months after issuance. Blackstone also intends to purchase additional shares of Allcargo on the open market but will keep total ownership below 15 percent, according to Allcargo.
MBK PURSUES SINGAPORE PHARMA COMPANY
MBK Partners has made a S$357.4 million ($252 million) bid to delist Singapore pharmaceutical company AsiaPharm in order to merge it with Portfolio company Luye Pharmaceutical International. The firm has bid at S$0.73 per share. The company's share price rose more than 10 percent to S$0.7 per share at the close of the Asian markets following the bid. The offer is a 31.1 percent premium to the company's share price in the month preceding the bid. AsiaPharm researches, develops and produces pharmaceutical drugs. MBK has received irrevocable undertakings from shareholders with a 44.17 percent stake. It is seeking to delist the company from the Singapore Stock Exchange. Dutch bank ABN AMRO is advising MBK.
CHINA IN TALKS TO HAND FLOWERS $4BN
China's sovereign wealth fund the China Investment Corporation is near an agreement to invest around $4 billion (€2.76 billion) in US buyout firm JC Flowers' latest fund, according to media sources. The commitment would be one of the largest ever made. UK alternative assets manager SVG made a €2.8 billion ($4.06 billion) commitment to UK buyout firm Permira's fourth fund in 2006 which is thought to be the biggest. JC Flowers closed its last fund on $7 billion in 2006. The firm's profile has never been higher, in spite of its founder Christopher Flower's aversion to publicity. The firm was involved in an aborted bid for troubled UK bank Northern Rock and pulled out of an agreed $30 billion bid for US loan provider Sallie Mae. The turmoil in the world's financial sector has already led to several large scale investments by Asian and Middle Eastern sovereign wealth funds in the world's biggest banks, including the Abu Dhabi Investment Authority's $7.5 billion acquisition of a stake in Citi and Singaporean sovereign wealth fund GIC's planned Sfr13 billion ($11.8 billion) investment in UBS alongside an unnamed Saudi Arabian investor.