AppId is over the quota
AppId is over the quota
By Janeman Latul and Stephen Aldred
JAKARTA/HONG KONG | Tue Sep 27, 2011 11:07am BST
JAKARTA/HONG KONG (Reuters) - Sigit Prasetya is a smartly dressed mathematics whiz, a straight talker, and a man dialed into wealthy circles. Patrick Walujo is a U.S.-educated engineer known for political connections, dogged persistence and a passion for tennis.
The two are widely seen as the main reason why private equity firms CVC Capital and TPG Capital have jumped way ahead in the race to invest in the vast and untapped markets of Indonesia, Southeast Asia's biggest economy.
Since 2005, there have been 18 private equity deals in Indonesia with $1.8 billion (1.2 billion pounds) of cash invested, according to Thomson Reuters. CVC and TPG are responsible for more than half of that dollar figure, investing in companies such as retailer Matahari Department Store (LPPF.JK) and coal group PT Delta Dunia Makmur (DOID.JK).
Dwarfed by the likes of Greater China and India, Indonesia is a tiny fragment of the Asia buyout market. Still, with competition heating up, global firms are looking for speedy growth and uncrowded markets.
"It's definitely hot and we think that there's going to be more capital chasing deals in Indonesia," said Walujo, speaking last week at the SuperReturn conference in Hong Kong. "Competition is going to heat up, but so far this has not translated into price inflation for the deals that we do."
Indonesia has long tempted investors, its reputation for red tape and corruption often overshadowing the promise of its 240 million people with a fast-growing youthful middle class and rich natural resources.
That middle class is snapping up smartphones and motorcyles, as annual growth surging at near 7 percent drives a consumer boom. The country is the No. 2 Facebook user in the world, and No. 3 on Twitter, said a recent report from HSBC.
The same report said Indonesia's per-capita GDP -- $3,000 in 2010 -- could hit $20,000 by the late 2030s, giving Indonesians the same spending power as Koreans.
Risks, however, abound in Indonesia -- rampant corruption among them. The growth potential that excites investors is tempered by critics who believe the country still has a ways to go before fixing fiscal problems and achieving economic success that puts it on a scale with larger countries.
Those risks were on display lately, as Indonesia's benchmark stock index has dropped, plummeting 10.7 percent last week alone.
Such risk factors have played a role in keeping foreign funds out of the country, regardless of its economic promise. And so far, while private equity money has gone into Indonesia, it is not yet clear how much of it will come out in the form of profits for the buyout firms and their investors.
For TPG and CVC, the opportunities outweigh the risks.
U.S.-based TPG, founded in 1992, is the only global buyout firm to partner with a local Indonesian group. The firm moved to deepen its ties there this month, when it struck a deal with partner, Northstar Pacific, acquiring an undisclosed stake in the firm.
Of all the deals that TPG and CVC have done in Asia's fourth largest economy, industry sources say the transactions always come down to two people: "Sigit" and "Patrick."
SIGIT
CVC, a London-based firm founded in 1981, has 37 investment professionals around Asia, all speaking the language of the markets they deal with.
"If you want to be successful, you can't just fly in and fly out," said Maarten Ruijs, the firm's Asia managing partner and CIO. "If you look at our operations, I am the only person who is not from Asia," he said, speaking at the SuperReturn event.
CVC's Prasetya, the head of its Singapore office, has quietly become a star dealmaker with a string of regional deals, beginning in earnest with last year's purchase of a controlling stake in retailer Matahari from the Lippo Group for $790 million in Indonesia's largest ever private equity deal.
The Indonesian-born Prasetya now has a portfolio of investments that include RCBC Bank in the Philippines, gaming asset Magnum in Malaysia, and Amtek Engineering (AMEL.SI) in Singapore.
With Matahari, he made a mark. It wasn't just the untested structure -- Indonesia's first leveraged buyout -- but the fact that CVC earned an inside line to one of Indonesia's most powerful and influential families, the Riyadis, owners of the Lippo Group.
"The Riyadis have hospitals, hotels, REITs, real estate, department stores, hypermarkets -- so the portfolio opportunities that opened once you make one investment are massive," said one banker who declined to be identified.
Prasetya, a former Morgan Stanley (MS.N) banker who joined CVC in 2007 from Henderson Private Capital, declined all requests for an interview, but sources who know him, including former colleagues, described him as well-connected with a quick mind for math.
He graduated summa cum laude in mathematics before earning a Masters of Business Administration degree from the University of New South Wales in Australia.
"I once was in a meeting with him for a deal and his response on a calculation issue was very fast," said a Lippo Group executive who declined to be identified by name. "The only person I know as good as him in math is my boss, (Lippo CEO) James Riady. Perhaps that's what makes them click together."
PATRICK
TPG's partnership with Northstar dates back to 2006, when critical reforms in the post-Suharto era pushed Indonesia onto a growth path, luring foreign investors back to the country after the catastrophic economic collapse of 1997-98.
Dapper, carefully spoken Walujo co-founded the firm in 2003 after an investment banking career that included stints with Goldman Sachs (GS.N) in London and New York.
It is not as if the two firms are free of competition. In fact, the Carlyle Group has competed on several deals in Indonesia, and has yet to clinch.
There are also an estimated two dozen home grown firms chasing transactions.
Both TPG and CVC have a long established presence across Southeast Asia, with investments in Vietnam, the Philippines and Malaysia. Affinity Equity also has a strong presence in South East Asia.
Private equity and bank sources say Walujo built up an enviable network of contacts as a young investment banker. He is married to the daughter of Theodore Rachmat, who previously ran auto distributor Astra International ASIL.JK.
The sources say Walujo was instrumental in generating investments for TPG in coal contractor PT Delta Dunia Makmur and PT Bank Tabungan Negara BTN.L (BBTN.JK), as well as numerous indirect investments through its role as an LP investor in Northstar funds.
TPG's relationship with Northstar gives it access to 25 to 30 investment professionals on the ground there.
"The length of time they've been here, the fact that they can point to their firms having been consistently in the market and never pulling out, and then once you print two or three deals, you have the benefit of momentum where people see your name in the press," said an investment banking source. "They know you're credible, so the momentum flows."
(Additional reporting by Saeed Azhar in Singapore; Editing by Jason Szep and Michael Flaherty)
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