TPG buys into Indonesian fund manager

The US firm has reportedly taken a 10-20% stake in Indonesian firm Northstar, echoing its original approach to Asia via Newbridge Capital, an affiliate it later subsumed.

TPG Capital has traded a stake in its management company for a stake in Northstar Pacific, an Indonesian private equity manager whose funds its has previously backed.

A source familiar with the situation confirmed the development but declined to provide additional details.

The Indonesian private equity firm now owns a stake of less than 5 percent in TPG, while TPG holds somewhere between 10 percent and 20 percent of Northstar, according to a Financial Times report. 

In addition, TPG managing director and head of Southeast Asia Ashish Shastry will join Northstar as a partner while remaining a special advisor to TPG, the source said. The transition will take place over the next several months.

TPG built its relationships with Northstar by investing in the firm’s first and second funds, which closed on $110 million and $285 million respectively. The Jakarta-based firm recently closed the third fund on $750 million, beating its original target of $500 million.

“[TPG is] now bringing the Northstar funds under the family of TPG funds,” the source added.

Late last year TPG co-founder Jim Coulter said during an industry conference that Indonesia was among the emerging markets presenting compelling opportunities. But, he warned the largely North American audience members that had gathered for the conference in Quebec, “If you think you’re going to take your business model from the US and go into emerging markets, you’re going to get killed. It’s a totally different private equity business.”

TPG's purchase of a stake in Northstar may seem a familiar pattern to those familiar with how the firm established its footprint in Asia. In 1994, along with San Francisco-based Blum Capital, TPG helped establish Asia-focused Newbridge Capital. TPG subsumed the affiliate in 2006; Blum's 20 percent stake in Newbridge was expected to drop as a result. TPG closed its fifth pan-Asian fund in 2008 on $4.25 billion.

TPG is not the only private equity firm eyeing opportunities in the country, which enjoys relative political stability, has a population of over 235 million and a healthy real GDP growth rate averaging more than 5 percent over the last decade. But many have found it a difficult place to transact given it is dominated by large, cash-rich family conglomerates.

So far, smaller deals have been most prevalent in Indonesia. In July, for example, CLSA Capital Partners made two investments in tea company PT SariWangi AEA and PT Sinar Mitra Sepadan Finance for a combined $35 million.