Given the impact of the liquidity crisis around the world, the common view in the Australian buyout market is that today you will struggle to finance any deal worth more than A$1 billion (€587 million; $868 million). Which means that a bid of A$2.9 billion to take private listed ports and rail operator Asciano by TPG Capital and Global Infrastructure Partners may have taken some by surprise.
As an infrastructure business based around its Patrick ports and stevedoring business and its Pacific National rail operations, Asciano offers steady, reliable cash flow and hard assets and is therefore just the kind of business lenders will go the extra dollar for. That said, they may have to stump up a few more dollars yet. On 5 August, Asciano rejected the offer, claiming that it represented an under-valuation.
This goes to the heart of another surprising aspect of the bid. Australia has become a graveyard for take-private bids over the last couple of years, the eventual collapse of the A$11 billion bid for national airline Qantas being only the most high-profile example of a string of attempted stock market swoops that were ultimately shot down in flames by resistant shareholders. Under the circumstances, the TPG/GIP move appears bold to say the least.
One Sydney-based GP told PEI that he detected a subtle shift in sentiment this time around, however: “The publicity around bids like Qantas and [retailer] Coles Group made it extremely difficult for their boards to stay totally rational. These were Australian icons. The response to TPG/Asciano has been very different. Yes, there is a debate about value – but it's not being seen as a situation where private equity guys are taking advantage.”
In keeping with this view, Asciano issued a statement that struck a conciliatory note by making clear that it remained open to further talks in the hope that they would lead to a “fair offer”. Given a 25 percent fall on the Australian Securities Exchange since November last year, such a softened stance is not entirely surprising. Corporate confidence in Australia has been shaken for the first time in a long while, and private equity firms may yet be major beneficiaries.
CVC OPENS IN BEIJING
CVC Capital Partners, the global private equity fund manager, has launched operations in Beijing, its first office in mainland China. The Beijing office, which complements an existing base in Hong Kong, will be headed by Zhu Wei, who has also been appointed as managing director. Wei joins CVC from Goldman Sachs, where he was a managing director of the investment banking team in China and headed the bank's Shanghai coverage. Wei was also a managing director of Goldman Sachs Gao Hua Securities. Before Goldman, he was president of management consultant A. T. Kearney's Greater China operations and of Roland Berger China. Wei joins Francis Leung, William Ho and Alvin Lam on CVC's China team. Formed in 1981, CVC manages approximately $46 billion (€29.3 billion) in private equity funds globally. It has made more than 30 investments in Asia, with an enterprise value of more than $19 billion.
CHINESE FUND OF FUNDS LAUNCHED
IManagers Group, a Beijing investment advisory and fund management firm, is launching a Y2 billion ($291 million; €186 million) fund of funds to invest in Chinese private equity funds. IManagers is an affiliate of China Limited Partners Association (CLPA), which was established earlier this year with the aim of increasing awareness about private equity among existing and potential limited partners. It currently has among its members 30 institutional investors from both China and overseas – a number that is expected to increase. Gary Xu, secretary general and head of the association, said members include trusts, banks and government-linked agencies. He said the fund would differ from other fund of funds as its primary objective is to increase awareness about private equity and provide potential investors access to the asset class. There are few limited partners in China at the moment and CLPA's fund of funds would essentially help bring greater professionalism to new or would-be limited partners to the asset class.
INDIAN CONSUMER FUND HALFWAY TO TARGET
TVS Capital Funds, a Chennai-based asset management company, has raised 5 billion Indian rupees ($116 million; €73 million) from domestic investors for an India-focussed fund which is targeting a final close on 10 billion rupees within the next 12 months. Suresh Raju, executive director at TVS Capital, said TVS Shriram Growth Fund is“amid-cap fund that will invest in businesses that are regionally focussed. It will be targeted at emerging cities which have a lot of untapped opportunities in consumption-driven businesses”. The fund will invest in sectors such as healthcare delivery, privatised education, hospitality, speciality retail, food and agribusiness, and consumer media and entertainment. It will commit between 100 million and 500 million rupees per transaction for the purpose of acquiring a strategic minority interest and active participation on the board.
ARCH INVESTMENT IS EDUCATIONAL
ARC Capital Holdings (ARCH), a London AIM-listed investment company, is acquiring a 45 percent stake in a private university in Shaanxi, China for $71 million (€45 million) . The close of the transaction is subject to regulatory approvals. The name of the university has not been disclosed. The investment is ARCH's second in the Chinese education sector, following a $42 million investment in a private college in Beijing last November. According to the China Statistics Yearbook 2005, only 6 percent of people between the ages 25 to 34 have completed higher education in China, as opposed to about 27 percent in OECD countries. The growth potential for tertiary level education in China is large given the country's rapid economic development, increased income levels, and a growing demand for professional skills in the country.
DUBAI SUBSIDIARY FOR CITADEL
Citadel Capital, the Cairo-based private equity firm, is establishing a subsidiary in Dubai to be named Citadel Capital Institutional Fundraising. The office, a component of the firm's ongoing effort to expand its institutional fundraising, will be headed by financial veteran Stephen Murphy. Until recently European head of private placements at Citigroup Global Markets, Murphy has over 20 years' experience in private equity fundraising and investment banking. “The new office will serve multiple roles,” said Citadel Capital chairman Ahmed Heikal in statement. “We wanted to have an office on the ground in the GCC out of Dubai. This is primarily for fundraising and communication with our investor base, but we would also like our presence there to serve as a listening post to keep us closer to the developments happening not only in Dubai and the UAE, but also in the Gulf at large.”
ARCAPITA JOINS COLUSSUS IN POWER DEAL
A joint venture between Bahrain-based investment firm Arcapita and Colossus, a holding company of the Indian conglomerate Tanti Group, has acquired Beijing-based Honiton Energy Holdings as part of a plan to invest $2 billion (€1.3 billion) in Chinese wind farms. The joint venture plans to develop wind farms in the country's Inner Mongolia region with a capacity of 1,650 megawatts. The deal is Arcapita's first investment in China, after it revealed earlier this year that it was in talks to buy up to three Asian utilities at up to $3 billion each. Tanti owns two-thirds of the Indian wind turbine maker Suzlon Energy.
PERMIRA APPOINTS GREATER CHINA CHIEF
London-based global investor Permira has hired Henry Chen as the head of its operations in Greater China. He will be based out of Hong Kong and head the firm's office there. Chen will report to Guido Paolo Gamucci, chairman of Asia Pacific for Permira. Gamucci said that Chen's sector expertise in consumer retail, industrials and healthcare are aligned with the firm's core areas of expertise. Chen previously spent nine years at Goldman Sachs, where he led and executed a number of transactions primarily in greater China. In his most recent role at the US investment bank, he served as co-head of the general industrials group for Asia ex-Japan. He was responsible for managing the investment banking coverage of the industrial, transportation, consumer retail and healthcare sectors. Prior to that, he was the chief operating officer of corporate finance at Goldman.
GUGGENHEIM SNAPS UP INDIAN FOF BUSINESS
Thomas Weisel Partners has agreed to transfer ownership of its fledgling India-focussed private equity fund of funds business to Guggenheim Partners, according to a source familiar with the transaction. The fund of funds operation includes eight professionals and is headquartered in Mumbai. The team is led by KV Dhillon, who has been with San Francisco-based Thomas Weisel since 1998. The firm is currently in the market with its first fund, the Thomas Weisel Partners India Opportunity Fund. The fund has a current target of $100 million, although this may be significantly increased. The India team has previously committed third-party capital to private equity funds. Guggenheim Partners' placement division is leading fundraising for the new limited partnership vehicle. New York- and Chicago-based Guggenheim Partners, which has several asset management and capital markets divisions, is not entirely new to India. The firm's infrastructure investment affiliate has completed two transactions in the country.
CARLYLE BOLSTERS ASIAN LEVERAGE TEAM
Global private equity firm The Carlyle Group has hired David Balint as director of Carlyle Asia Leveraged Finance Group. Balint will be based in Sydney and will manage the firm's operations in Australia and New Zealand, the firm said. Balint was previously a director of the leveraged and acquisition business at ANZ Bank in Sydney, where he led deal sourcing and was engaged in arranging and underwriting transactions. Before that, he worked as a financial advisor and underwriter at ANZ's project and structured finance business in Melbourne and London, focusing on Australia, Europe and the Middle East. In his new role, Balint reports to Eric Mason, head of Carlyle Asia leveraged finance group.