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Wed, 13-May-2009 Hopu Investment Management Co., a US$2.5 billion China private equity firm, led a group of investors in buying 13.5 billion shares of China Construction Bank, China’s second largest lender, from Bank of America for about US$7.3 billion, sources said on condition of anonymity as reported by Bloomberg.
- Share transaction at 14.3% discount. Price per share of HK$4.20 per share (54 US cents) or 14.3% discount to yesterday’s closing price of HK$4.90 (63 US cents). Total lot sold were 13.5 billion shares for a total purchase price of US$7.3 billion which is roughly a 5.8% stake in China Construction Bank. China Construction Bank closed at HK$4.98 (64 US cents) in Hong Kong on Tuesday. Given the discount as compared to prior large sales of shares, it appears Hopu and the group of investors utilized their negotiating leverage given the U.S. regulators’ recent stress test requirement that Bank of America raise $34 billion in new capital. Bank of America owns another 25.6 billion shares that it cannot sell because of lock-up period through August 29, 2011. Read More »
Tue, 12-May-2009
Billionaire investor, George Soros, says the global economy has already passed the worst of the crisis and should soon pull out of its slump, led by Asia and China in particular. And as China gradually edges out the US as the world’s economic superpower, it will begin to replace America on the political stage as well, said Soros.
Other Quotes by George Soros in an interview with German daily Frankfurter Allgemeine Zeitung
- Economic downward dynamic, recovery and stagnation. “The economic free fall has been stopped, the collapse of the financial system has been averted. National economic stimulus programs are starting to take effect. The downward dynamic is easing.” “I expect the recovery to make up for around half of the downturn we have had and then to move into stagnation.”
- Asia first to emerge economic crisis and China to replace U.S. as motor to world economy. “Asia will be the first to come out of this crisis but America is close behind. Nevertheless, China will replace the US as the motor of the world economy,” he said. “The American economy is still bigger than the Chinese. However, China will begin to contribute more and more to global economic growth. Therefore, political power will shift from America to China,” Soros predicted.
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Tue, 12-May-2009 Hopu Investment Management Co., a US$2.5 billion private equity fund led by ex-Goldman Sachs China partner Fang Fenglei, has been approached by investment banks seeking to sell shares of China Construction Bank Corp., China’s second-largest lender, on behalf of Bank of America Corp., said sources reported by Bloomberg. Bank of America owns 39.1 billion shares in China Construction Bank, or approximately 16.7%, of which 13.5 billion shares or approximately 6% (US$8.5 billion) is available for sale given the expiration of a lock-up period. The remaining 25.6 billion shares are under a lock-up period and cannot be sold before August 2011. Bank of America first invested in China Construction Bank Corp. in 2005, ahead of its initial public offering, at a discount to its HK$2.35 (30 US cents) price.
Hopu is working on pricing with the investment banks said sources. China Construction Bank closed at HK$4.90 (63 US cents) in Hong Kong on Monday, May 11, 2009. Bank of America was recently judged by the U.S. regulators’ stress tests that it needs US$34 billion in new capital.
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Mon, 11-May-2009 Here is a list of the top Asian business schools as compiled by BusinessWeek. Given the global economic crisis, rising retrenchment levels and depressed job market, Asia’s top business schools are experiencing an unprecedented spike in applications, especially from candidates in the U.S., as people are seeking to further enhance their credentials during this slower economic period. “With the center of gravity in the global economy shifting to Asia, it’s just natural for students from the U.S. and Europe to seek Asian experiences and networking opportunities through business schools in Asia,” says Suh Kil Soo, associate dean at Yonsei University Graduate School of Business.
Asia’s Top Business Schools Read More »
Mon, 11-May-2009 Son Nam Nguyen, former managing director and head of Vietnam investment banking for Citi, has started with other partners a Vietnam-focused investment bank called Vietnam Capital Partners Limited. Currently, the new firm has 16 people.
About Son Nam Nguyen
Son Nam Nguyen was born in Vietnam and graduated from Harvard Business School in 1995. He then joined Salomon Brothers as an associate in New York and then moved to Asia in 1999. He was a vice president in the financial institutions group and then made managing director in Citi’s Asia-Pacific technology investment banking in Hong Kong.
Fri, 8-May-2009 Private equity firm Kohlberg Kravis Roberts & Co. has reached an agreement to acquire South Korean Oriental Brewery (OB) from Anheuser-Busch InBev for $1.8 billion, in one of the largest leveraged buyouts announced this year, reported various media reports. The deal also marks KKR’s first investment in Korea and will help to boost confidence in the private equity industry in Asia.
Key Deal Terms
- Target. Oriental Brewery is the second largest brewery in South Korea with approximately 40% market share in a $2.8 billion beer market duopoly. Hite is the largest brewery with approximately 60% market share. Oriental Brewery’s beer sales by volume rose 6.1% in 2008 which was more than double the total South Korean beer market.
- Purchase price-to-EBITDA of 9x. With a $1.8 billion purchase price, KKR is paying approximately 9x EBITDA (earnings before interest, taxes, depreciation and amortization — known as a measure of cash flow). OB’s EBITDA was around $200 million, sources close to the deal said. Previous acquisitions in the beer sector commanded multiples of 12x cash flow or more. “The price doesn’t look excessive,” said Lee Kyung-min, analyst at HI Investment & Securities and “it looks like a pretty good deal for KKR.”
- Debt financing of 3.75x EBITDA. Approximately $750 million in debt financing which equates to approximately 3.75x EBITDA or approximately 40% of the capitalization structure. This is a sign of the current global economic environment because the range was between 6x to 8x during the boom times before the credit crunch. The lender group includes JPMorgan Chase, Standard Chartered, HSBC, Calyon, ING Bank, Natixis and Nomura, Reuters Basis Point reported earlier.
- Seller financing of 1.5x EBITDA. AB-InBev is providing seller financing of $300 million in pay-in-kind vendor financing at attractive terms which equates to approximately 1.5x EBITDA or approximately 16% of the capitalization structure. Read More »
Thu, 7-May-2009 Zotye Auto, a Chinese maker of sport utility vehicles (SUV), is raising about 720 million yuan ($106 million) by selling a 20% to 30% stake to a group of investors led by SND Ventures Group, a Chinese private equity firm backed by the Suzhou government in eastern China. Zotye Auto is aiming for a Shanghai initial public offering in the future. “The landscapes of the auto industry in the United States and China are totally different,” said one of the sources. “Chinese consumers are just starting to buy cars, while Americans may think about their second or third cars, which is not necessary when your budget is tight in the financial crisis,” he added. China overtook the United States as the world’s largest vehicle market this year and its top carmakers projected sales growth of up to 10% in 2009, making the country the only bright spot among major car markets.
About Zotye Auto
Zotye, based in China’s eastern Zhejiang province, plans to make and sell 500,000 vehicles by 2012, aiming to double that capacity by 2017. The factory of Zotye Holding Group occupies 1.2 million square meters, there are over 3,000 staff and its total asset is more than 3 billion RMB ($440 million), according to its website.
(US$1=6.819 Yuan)
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Thu, 7-May-2009 Hong Kong-based Li & Fung Ltd., the largest supplier of clothes and toys to Wal-Mart Stores Inc. and Target Corp., plans to raise HK$2.7 billion ($348 million) selling new shares at a discount to fund acquisitions in the U.S. and Asia.
Selected quotes and excerpts by Company President Bruce Rockowitz
- Asset prices are more attractive. As prices of assets have fallen globally, Li & Fung is seeking “acquisitions and some major outsourcing deals,” he said in an interview with Bloomberg Television in Hong Kong. “We see a lot of opportunities in the U.S. right now to buy things that we’ve always wanted to buy, at prices that we feel are very reasonable.”
- Market bottom. He said he sees signs the world’s largest economy has “hit a bottom,” and that “the bottoming out will probably last until the end of the year.” “The U.S. is starting to improve and this is a dominant market of Li & Fung.” “Things are a lot more optimistic now than in October, even two months ago.”
Citigroup Inc. and Goldman Sachs Group Inc. are managing the Li & Fung sale.
About Li & Fung Ltd.
Li & Fung Limited is the world’s leading consumer goods supply chain management company, managing the supply chain for retailers and brands worldwide. Headquartered in Hong Kong, the Group services its customers globally through a sourcing network of over 80 offices in more than 40 economies. The company is listed on the Hong Kong Stock Exchange under stock code 494.
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Thu, 7-May-2009
Goldman Sachs believes that the four largest economies in the world will be China, India, the US and Japan by 2015. That three of the four largest economies in the world might be Asian suggests that the old world order is re-establishing itself, according to Dr Kishore Mahbuani at the Lee Kuan Yew School of Public Policy at the National University of Singapore reported BBC.
Quotes and excerpts from article:
- Asia center of world power and 200 year aberration. “From the year one to the year 1820, the two largest economies of the world were consistently China and India,” Dr Mahbuani says. “In the 19th and 20th Century, first Europe took off and then North America,” he says. “But the last 200 years were historical aberrations.” Dr Mahbuani maintains that Asian countries are becoming more confident about their future and that the “Asian Century” is coming. Ajay Chibber, assistant secretary-general of the United Nations, believes that if Asian leaders take the right decisions in the way they rebalance their economic structure, then Asia will become as it was 400 or 500 years ago – the center of world power.
Thu, 7-May-2009 Morgan Stanley Investment Management (MSIM) recently announced that Morgan Stanley Alternative Investment Partners (AIP) raised $1.14 billion in commitments for Morgan Stanley Private Markets Fund IV, a private equity fund-of-funds. MS Private Markets Fund IV incorporates three main strategies: Buyouts, primarily in North America and Western Europe, global Venture Capital and global Special Situations. AIP’s investment strategy emphasizes less efficient market segments and targets managers with differentiated skill sets in the U.S., Western Europe and emerging private-equity markets.
“We search broadly for opportunities that are highly differentiated relative to their peer set,” said Tom Dorr, Chief Investment Officer, Private Equity Fund of Funds Team. “Overall, these opportunities must fit within a diversified portfolio framework while capitalizing on current market dislocations. In today’s environment, distressed – including secondary purchases – and asset-backed strategies are especially attractive.”
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Wed, 6-May-2009 The Association of Southeast Asian Nations (ASEAN), together with Japan, China and South Korea will start a $120 billion foreign-currency reserve pool by year-end to help revive investor confidence as economies around the region falter amid the worst global recession since World War II reported Bloomberg. The Asian nations will use the funds in times of turmoil and will set up a surveillance unit that will identify risks to the region and provide oversight of the fund. The arrangement, known as the Chiang Mai Initiative, is under a nine-year framework where Asian nations can borrow, without restrictions, 20% of an agreed swap amount and can tap the 80% of the balance only after agreeing to IMF-style restrictions. The pool, formed within an existing framework of bilateral currency swaps, widens access to foreign-exchange reserves and will allow nations such as Indonesia and Thailand to defend their currencies.
Japan and China (including Hong Kong) will contribute $38.4 billion each to the poo, South Korea will contribute $19.2 billion, Thailand, Indonesia, Malaysia and Singapore, the four biggest Southeast Asian economies, will contribute $4.77 billion each, and the Philippines will provide $3.68 billion.
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Wed, 6-May-2009 Private equity giant TPG, formerly known as Texas Pacific Group, is seeing a “full pipeline of investment opportunities” outside from the traditional leveraged buyout deals the firm said in a letter dated March 30, 2009 to investors obtained and reported by Reuters.
Selected quotes and excerpts from the letter:
- Deal flow and seller/buyer expectations. In the past six months, TPG evaluated 140 investment opportunities but made none because the market dynamics and valuations were not right. In times of severe market dislocation deals are infrequent due to the difference between sellers’ and buyers’ expectations, the letter said.
- Investment opportunities and timing. “We believe that the combination of values falling to 10-year lows in many cases and the extraordinarily large amounts of debt coming due in the next few years means that we are soon to enter a time of extremely interesting opportunities.” TPG expects to be able to invest the capital it has from investors on schedule in the next three to four years, the letter said.
Tue, 5-May-2009 In Asia, some finance professionals and lawyers are reinventing themselves as restructuring specialists given the slowed pipeline of deals, public offerings, layoffs, etc. reports the Wall Street Journal. In the U.S. and Europe, bankruptcy and restructuring specialists usually focus on those situations for entire careers. However, in Asia and some other emerging markets, it is not unusual for bankers and lawyers to work on deals they put together, or restructure debt they previously helped arrange. “Whenever there’s a downturn, transaction lawyers become restructuring lawyers,” says Brett King, a lawyer at U.S. firm Paul Hastings‘ Hong Kong office.
- Negotiated Workout. Workouts in some important Asian jurisdictions, such as Hong Kong and Singapore, often take place with little direction from the courts, giving finance professionals greater latitude in finding solutions, often behind closed doors. “In Asia, it’s is much more a negotiated workout,” says Brett King. In mainland China, where bankruptcy laws were passed only a couple of years ago, a lack of precedent makes the private discussions between creditors and corporations even more crucial.
- Debt Buybacks. Debt buybacks also are occurring more frequently in Asia, as companies seek to take advantage of depressed bond prices to repay their debt more cheaply. Companies also are expressing interest in doing bond exchanges, which might extend the maturity date, giving a borrower more time to repay the principal on a bond. For convertible bonds, an exchange might seek to lower the strike price at which the bonds convert to shares, allowing the company to reduce overall debt. One example is Chinese packaging-products company Nine Dragons Paper (Holdings) Ltd., whose chairwoman, Zhang Yin, was once ranked by Forbes as the wealthiest person in China but whose net worth has since fallen sharply along with her company’s stock price. Nine Dragons recently bought back 58% of its debt outstanding from bondholders, who accepted a 47% discount to par.
Mon, 4-May-2009 Henry Kravis, one of the three founders of the private equity firm Kohlberg Kravis & Roberts, said he was “reasonably optimistic” about both India and the world economy, saying “rays of sunshine are starting to show up.” He made these comments during his visit to KKR’s new office in India that is being led by Sanjay Nayar, the former chief executive of Citibank India. The firm is also relocating KKR veteran Nathaniel Taylor from the firm’s Menlo Park office to Mumbai.
Other Henry Kravis Quotes
- Economic crisis and signs of recovery. “It’s bad and it’s global, and it happened so fast. It’s like somebody shut the lights off around the world. We haven’t decided yet whether the economy has turned around, but we’re seeing a few rays of sunshine. They are starting to show up in the US in particular, they’re starting to show up here (India) a little bit, in China and a few other markets around the world.”
- Deal environment changes. “We may not get a lot of mega deals, like we had in the 1980s and from 2004-early 2007 when banks were throwing money…Transactions up to $5-6 billion can still be done. Terms are obviously going to be different. You’re going to have real teeth in the agreements. And since the banks will be levering their balance sheets, the size of what they will be able to underwrite will come down to $1-5 billion or so.”
- Countries/regions with most attractive opportunities. “We like Asia very much because markets like India and China are much faster growing. We decided to come to Asia five years ago and established our Asian headquarters in Hong Kong. If you’re patient, you’ll do very well in Asia. We like the U.S. market still and there are opportunities there. Asset prices are falling everywhere. We raised $29 billion in our three funds in the past three years of which $15 billion is still available.”
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KKR portfolio company writedowns and FASB 157. “Our portfolio has about 48 different companies in it. As of December 31, 2008, we marked 80% of our portfolio down 41%. You might say that’s terrible. The other side of that is that 69% of our portfolio showed either increased or same earnings in 2008 versus 2007. I believe there’s something wrong with how this system (FASB 157) works. It will be changed sometime.” Read More »
Sun, 3-May-2009 China Zhongwang Holdings, Asia’s largest maker of aluminum extrusion products, recently priced its initial public offering raising $1.3 billion in the world’s biggest IPO so far this year reported Reuters. The HK$7 per share IPO price values Zhongwang at around 11 times forecast 2009 profits and was priced near the low end of an indicated HK$6.80-HK$8.80 range. China Zhongwang sold 1.4 billion shares, or nearly 26% of its share capital, and said it would use the proceeds to expand capacity and buy equipment, as well as for working capital, debt repayment and research and development. Zhongwang shares will trade under the 1333 Hong Kong stock code and debut on May 8.
Macquarie, CITIC Securities, JPMorgan and UBS were the joint lead managers of the deal. CITIC Securities, JPMorgan and UBS were the bookrunners.
About China Zhongwang Holdings
Liaoning-based Zhongwang makes two main types of products. Its industrial aluminum is used as parts and components for railway cargo, metro rails, trucks and autos. Its construction aluminum is used in the fabrication of door frames and window frames and interiors in upscale buildings. In the IPO prospectus, Zhongwang said 2008 revenues nearly doubled to 11.3 billion yuan ($1.65 billion) mainly from the demand and higher margins of its industrial aluminum. The company’s projects include a Beijing airport terminal and Beijing Olympic games venues.
(US$=HK$7.8)
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Sat, 2-May-2009 Sumitomo Mitsui Financial Group (SMFG) has agreed to acquire the assets of Citigroup‘s Japanese broker and key investment banking units for $5.9 billion and look to form a financial services powerhouse through an alliance with Daiwa Securities Group reported Reuters. SMFG will pay a total of 573.5 billion yen ($5.9 billion) for retail broker Nikko Cordial Securities, and parts of investment bank Nikko Citigroup, including stock and bond underwriting. Included is 28.5 billion yen worth of securities held by Citigroup.
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Fri, 1-May-2009 Malaysia-based private equity firm Navis Capital Partners has invested $30 million in Edutech for a majority stake of between 55% to 80%. Edutech is an education company with courses in areas like finance, healthcare, hotel management and hospitality as well as provides post-graduate and part-time executive programs. The company has revenues of Rs 55 crore ($11 mn) and seven branches spread across the India. With this investment, Edutech is planning to open five more campuses and also offer courses in areas like law and engineering.
Education sector has been increasingly attracting interest from private equity and venture capital investors, especially in the recent times. The investors are attracted by the non-cyclical nature and the huge opportunity presented by this under-served sector in India. The private spending on education is increasing by 14% CAGR and is expected to reach $80 billion by 2012, says a IDFC-SSKI report.
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Fri, 1-May-2009 IDFC Capital (Singapore) Pte. Ltd., the newly formed fund of private-equity funds unit of India’s Infrastructure Development Finance Co., is raising a US$500 million Asia-focused fund, a person familiar with the situation said cited by the Wall Street Journal. The fund will be focused on mid-market, growth-focused private-equity funds in Asian emerging markets, particularly China and India, the person said. There will also be some allocation to other Asian emerging markets and Southeast Asia as well as an allocation to other emerging markets such as Sub-Saharan Africa.
IDFC has hired Veronica John, previously a portfolio director at CDC Group PLC and principal investment officer at Asian Development Bank, to be chief executive of IDFC Capital.
IDFC was started in 1997 to finance infrastructure projects in India. It also has a private-equity unit, IDFC Private Equity, which manages US$1.3 billion through three funds.
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Fri, 1-May-2009 Clark Perkins, former chairman and chief executive of Goldman Sachs JBWere, is resigning after 14 years at the firm.
Mr. Perkins joined JBWere New Zealand in 1996 and became managing director and chief executive in October 1997. In 2003, he was one of seven partners who benefited financially from the merger with Goldman Sachs. In 2004, he became managing director of merchant banking across Australia and New Zealand and replaced Wayne Rowllings as New Zealand chairman. Mr. Perkins helped orchestrate a number of high-profile deals including the Pumpkin Patch and CanWest MediaWorks sharemarket floats.
In 2005, Goldman Sachs selected Mr Perkins to head up a new private equity fund. They raised the $415 million transtasman fund in early 2007. The most notable deal was the leveraged buyout of clothing store chain Kathmandu. The fund also invested in retirement village operator Vision Senior Living and Australian equipment rental business The Ned Group. Latest accounts show the transtasman fund booked a net loss of $A10.35 million for the year to June 2008.
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Thu, 30-Apr-2009 Kohlberg Kravis Roberts & Co. has recently emerged as the likely winner in the nearly $2 billion auction of Oriental Brewery Co. (OB) sold by Anheuser-Busch InBev NV in one of the largest leveraged buyouts this year reported the Wall Street Journal. Industry sources say KKR had raised its bid for OB, South Korea’s second largest brewer after Hite Brewery Co., to more than $1.9 billion and accepted most of InBev’s demands helped beat out competing private equity firms MBK Partners LP and Affinity Equity Partners cited by online news outlet MoneyToday.
Goldman Sachs is the advisor for KKR on the transaction. For lenders, KKR has JPMorgan, Standard Chartered, HSBC, Calyon, ING Bank, Natixis and Nomura, Reuters Basis Point reported earlier. JPMorgan and Deutsche Bank are running the OB sale.
This would rank as the second-largest LBO this year after CVC Capital Partners‘ $4.4 billion agreement earlier this month to buy Barclays PLC‘s iShares asset-management business, according to Dealogic.
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