The Brief mergermarket’s Weekly Private Equity Round-Up 24 December 2009 | Issue 44 Editorial 1 The Noticeboard 2 Private Equity Opportunities 3 Deals of the Week 9 Pipeline 17 Statistics 20 League & Activity Tables 23 Top Deals 32 Investor Profile: Affinity Equity Partners 35 Notes & Contacts 37 The Week That Was..... The last seven days: private equity in review 2009 was certainly an interesting year for private equity. The post- seen in the Financial Services sector and saw Bank of America global financial crisis deal making environment was one of the most raise much needed capital by selling its 5.78% stake in China challenging ever seen with issues surrounding leverage, corporate Construction Bank to a group of investors. The investors included valuations and a lack of viable targets all conspiring to dampen Singapore-based Temasek Holdings and Hopu Investment activity. Unsurprisingly, this is borne out in the raw numbers with a Management, the China-based private equity fund which has been total of 1,708 private equity-related deals coming to the market over particularly active this year. the course of 2009, worth a collective US$178.7bn. Compared to global announced activity in 2008, this represents a volume decline Despite significant buyout and exit activity in Europe, and to a of 39% while the 56% fall in valuations is even more pronounced, lesser extent Asia, it is unsurprising that the United States again perhaps unsurprising given continued issues surrounding debt emerged as the geography which attracted most private equity- financing and the related retrenchment to deal making at the mid related investment over the previous 12 months. The country to low end of the market. accounted for 36% of global activity in terms of deal volume and 42% of valuations – thanks in part to the abovementioned IndyMac Nevertheless, there appears to be light at the end of the tunnel for transaction. Going forward into 2010, it is likely that private equity private equity houses across the globe. Indeed, the back end of the houses will continue to look to broker deals in established markets year witnessed the belated return of the US$1bn+ private equity as funds aim to reduce their risk exposure and target solid returns deal with six of the top 10 largest deals of the year being announced through good old fashioned value creation. Examples of pure in the fourth quarter. The most significant of these was announced financial engineering are fewer and further between in the current in Germany and saw BC Partners and Apollo Management exit their market as the asset class has been forced to go back-to-basics. investment in cable network operator Unitymedia. In a transaction Many would argue that this is no bad thing. valued at US$5.2bn, the two funds sold out to Liberty Global, the US-based cable operator which offers video, voice and internet- By Tom Coughlan, Remark access services. Perversely, the two largest deals of 2009 were actually announced over the first half of the year. The top deal was seen in the United States and came about as a direct result of the global financial crisis. The buyout saw OneWest Bank, the federally licenced savings bank owned by a consortium of investors, move to acquire the banking operations of IndyMac Federal Bank, the bridge bank created to manage the assets and liabilities of IndyMac Bank. On the buy-side of the deal, the consortium was led by hedge fund Dune Capital Management and also included JC Flowers & Co, MSD Capital, Stone Point Capital, Soros Strategic Partners, Paulson & Co and Silar Advisors. Elsewhere, the largest private equity-related Asian deal was also The Noticeboard New funds Date Title Story snapshot Source 23-Dec-09 Foursan Group Foursan Group, a Middle Eastern private equity specialist, has launched its second www.4san.com launches its second fund, Foursan Capital Partners I (FCP), a private equity fund targeting investments fund in accelerated growth companies in Jordan and surrounding countries in the Levant and North Africa. FCP will have a first close on US$100m on January 1, 2010 and is targeting a final close of US$200m in 2010. Anchor Investors include OPIC, IFC, Jordan’s Social Security and Olayan Group. The fund, which will take significant stakes in medium-sized private companies, will invest in a range of sectors including financial services, food and beverage, education, aviation, pharmaceuticals and healthcare. 22-Dec-09 Helios targets Africa-focused private equity firm Helios Investment Partners is targeting up to www.privateequityonline.com US$650m for US$650m for its second fund, Helios Investors II. The vehicle, which has attracted second fund US$75m and US$60m from CDC and IFC respectively, is expected to invest around 50% of its capital in infrastructure-related projects including power, railway and telecom infrastructure. The fund will invest in companies mainly located in Nigeria, Ghana, Angola, Cote D’Ivoire, Kenya, Tanzania and Uganda, while other African countries may be considered opportunistically. 21-Dec-09 Kelso closes its Kelso Place Asset Management, a London-based private equity firm, has closed its www.altassets.com fourth turnaround Special Situations Fund on its hard cap of £100m (€112.3m), exceeding its initial fund on £100m target of £75m (€84.2m). The vehicle will target turnaround and special situations opportunities, which was the focus of the firm’s three previous funds. In particular, the fund will acquire controlling stakes in UK lower middle-market businesses with annual revenues of £10m to £100m. The fundraising effort was launched during the summer of 2009. Miscellaneous Date Title Story snapshot Source 21-Dec-09 Allianz to sell PE Following a year of overhaul for Allianz’s alternative investment activities, the German www.privateequityonline.com division AGF insurance giant has entered exclusive talks to sell its French private equity fund of funds business, AGF Private Equity (AGF). The prospective buyer is French private equity investor IDI Group, who, if succeeds, will more than triple its assets under management. The potential spin-off comes as AGF seeks to raise its fifth fund targeting €400m. IDI combines direct and indirect investment activity and has built up around nearly €600m in assets under management. 2 The Brief: 24 December 2009 | Issue 44 Private Equity Opportunities - Asia-Pacific Seoul Chunchon Highway to see stake sale in 2010; potential bidders likely to be financial investors, source says Date Value Currency Value Sectors Companies Countries Intelligence grade (M) description 18-Dec-09 28 US$ Book value Construction, Government, Hyundai Engineering & South Korea Strong evidence of 10% Transportation Construction Co, Government stake held of South Korea, Korean by Korea Teachers Credit Union (KTCU), Expressway Hyundai Development Company - Engineering & Construction, National Pension Service, Macquarie Korea Infrastructure Fund, New Daegu Busan Expressway Co Ltd, Samil PricewaterhouseCoopers, Seoul Chunchon Highway, Korea Expressway Corporation, EASI Accounting Seoul Chunchon Highway (SCH), a closely-held Korean highway operator, will see a stake in itself sold in 2010. Potential buyers would likely be financial investors, a source familiar with the matter said. The major shareholders of SCH include Hyundai Development Company with 25% stake, Macquarie Korea Infra with 15%, the Korean Teachers Credit Union with 15%, Hyundai Engineering & Construction with 10%, and Korea Expressway Corporation with 10%. There are five other stakeholders with less than 10% equity ownership. As reported by this news service, the South Korean government-owned Korea Expressway announced its intention to privatize its stake in SCH and had retained EASI Accounting as the financial advisor. Korea Expressway will start the stake sale process in early 2010, an insider from Korea Expressway said. The source said that potential bidders for the SCH stake would likely be financial investors rather than strategic investors, and named Macquarie Korea Infra and National Pension Service as potential buyers. Macquarie Korea Infra declined comment on its intention. With the stake sale by Korea Expressway soon underway, there is a high chance that the other stakeholders would follow suit and exit from their investments as well, the source said. The source declined, however, to estimate the exact deal size or quantum of stake that could potentially come up for sale. According to the source, there already have been talk among the construction shareholders to sell their investments in SCH. He said, however, that majority shareholder Hyundai Development Company is not one of them. He added that the potential sale price would be maximized if Hyundai Development Company sold its stake along with the other stakeholders. A spokesperson from Hyundai Development confirmed that it has no plan to sell its 25% stake at the moment. The potential sale price would be relatively less than the previous sale price of local peer New Daegu Busan Expressway, which was reportedly KRW8,250 (USD 7.01) per share, the source said. He said in his view that the sale price would be around KRW7,000 to KRW8,000 per share if the other stakeholders decide to sell at the same time as the Korea Expressway, but the price would be much lower, at around KRW6,000 per share, if only Korea Expressway sells its 10% share. He attributed this to the fact buyers would not see much merit in acquiring only a 10% stake. The book value of the 10% stake held by Korea Expressway is KRW32.4bn (US$27.6m) at KRW5,000 per share, according to company’s 2008 financial statement. Reliance Media World may raise US$50m to US$100m next quarter; to explore several options, source says Date Value Currency Value Sectors Companies Countries Intelligence grade (M) description 23-Dec-09 43 US$ Turnover Consumer: Other, Reliance ADAG Enterprises India Strong evidence for the Consumer: Retail, Leisure, (Anil Ambani group), Reliance year ended Media, Other, Services Media World March 2009 (other) Reliance Media World, a listed Indian media company, will explore several options to raise funds, including an equity placement, a company source said.