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CVC to spend $1bn to buyout of SE Asian companies


October 2, 2008

CVC to spend $1bn to buyout of SE Asian companies
Multinational equity giant CVC Capital Partners, a major shareholder of the Formula One racing event and Britain's leading department store Debenhams, plans to spend up to $1.26 billion to buy companies in Southeast Asia, including in Indonesia, reported Indonesia daily the Jakarta Post.

The company raised $4.2 billion in April of this year for its third Asia Pacific fund, the paper quoted CVC Asia Pacific's managing partner, Roy Kuan, as saying.

"We hope to spend 25-30 percent of this fund in Southeast Asia," Kuan said during a media luncheon held recently in Singapore.

CVC is looking forward to acquiring businesses in Singapore, Malaysia, and Indonesia, he added.

"More business owners are retiring and more businesses will potentially be sold."

Sigit Prasetya, CVC's Asia-Pacific managing director, said the company has yet to make any investment in Indonesia, but is looking forward to doing so.

All sectors, except real estate, which is too risky, present investment opportunities, he added.

"Indonesia is a very big consumer market. So, commodities, infrastructure, and energy spaces will be the most attractive investments," he added.

As an equity firm, CVC is entrusted by its investors with identifying and investing in businesses believed to be capable of generating long term capital appreciation.

Investors include pension funds, insurance companies and governments.

Kuan said he believed Indonesia had become quite favorable for foreign investment, despite its tendency to be overlooked.

"Technically speaking, Indonesia is friendlier toward foreign investors. The political situation and the currency exchange rate are stable and banks are healthier," he said.

Restrictions on foreign ownership in Indonesia are also deemed more favorable for investors than those in Malaysia and Thailand, Kuan added.

"For example, the percentage of foreign ownership allowed for local banks is higher than that of Malaysian and Thai banks."

Indonesia's relative protection from global slowdown is another draw for investment.

Despite these advantages, debt financing is very expensive in Indonesia compared to neighboring countries, particularly with respect to privatizing a publicly listed company, he said.

"The Indonesia Stock Exchange, unlike Malaysia's or Singapore's, doesn't have private takeover rules which allow privatisation.

"If you make an offer to buy a listed company in which 70 to 90 percent of the shareholders approve the deal, you can privatise it. That's common in most countries. But Indonesia does not have such a regulation yet. That's one of the obstacles we're facing," he said.

CVC already has several deals in the region. In July 2008, funds advised by CVC Asia Pacific completed the buyout of Magnum Corporation, Malaysia's leading gaming company, worth $1.54 billion.

In August 2007, CVC funds from consortium partners took over Amtek Engineering, the largest metal stamping company in Singapore by production output and facilities.

CVC, founded in Luxembourg in 1981, manages over $43 billion in equity funds. It has completed 270 transactions, including 30 investments in Asia. Its funds own 53 companies with revenues in the billions of dollars.

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