Quarterly Review a Publication of the Emerging Markets Private Equity Association ● Volume V, Issue 4, Q4 2009 December 2009

Emerging Markets Private Equity Quarterly Review A Publication of the Emerging Markets Private Equity Association ● Volume V, Issue 4, Q4 2009 December 2009

Viewpoint In This Issue 2009 will go down as one of the most challenging years on record for the global private equity industry. But for PE in the emerging markets, although FEATURES challenging, 2009 will be also be remembered as the year that set up the long- term development of a stable asset class.

2009 in Perspective and This was the year that emerging markets PE survived intact, unlike earlier in Predictions for 2010 3 this decade when the industry almost disappeared from the map. While fundraising plummeted in 2009, falling by 65% in the first three quarters compared to 2008, by year end capital raised will likely reach 2006 levels. By mid-2009, Agribusiness Private Equity: EM PE fundraising represented some 20% of global PE funds raised, com- The Fertile Sector 6 pared to just 5% in 2004. So while EM PE didn’t grow this year, it took a larger share of a shrinking global pie.

Inaugural Private Equity in Africa Deal activity, unlike in the Western buyout space, continued in 2009 at a fairly Executive Summit—London 12 brisk pace. While investment amounts were down by 54% through Septem- ber, deal activity as measured by number of transactions was down only 26%, suggesting that fund managers took calculated risks and continued to invest 5th Annual PE Forum—London 15 in smaller—or, better yet, just cheaper—deals.

2nd Annual Global Private 2009 will also be remembered as the year when local industries began to take up the slack left by a cash-constrained Western institutional LP base. Equity Forum Beijing 16 China accelerated its effort to develop its own brand of private equity. From government-backed funds, to local LPs, to new fund structures, China is bet- News and Data ting on the PE and VC industry as critical to its future economic development.

As in China, there is a slowly growing base of domestic institutional capital Funds Launched & Closed 18 in many other emerging economies, including Brazil, Colombia, Peru, South Africa, Mexico, Nigeria, and India. In India, although public pension funds are barred from investing in the asset class, several leading domestic fund man- EM PE Performance 20 agers still raised the lion’s share of their capital locally from banks, insurance companies and other institutions. Many of the Western global megafunds Member News 22 have been seen hunting for pension fund commitments in Peru and Colombia. So what’s the outlook for 2010? There is no question that fundraising from Notable EM PE Exits & IPOs 25 Western institutions will continue to be challenging until they see liquidity from their large buyout funds that represent the bulk of their PE exposure. Development finance institutions will continue, alongside local EM investors, EMPEA Members 26 to fill the financing gap and keep established, well-performing managers alive. And there will inevitably be market consolidation, as some funds are sim- ply unable to raise additional capital. But given the explosive growth of 2007 Featured Events 28 and 2008, pausing for breath, letting the dust settle, and seeing the strong emerge may be just the right recipe for the next stage of the development of the PE and VC industry in emerging markets.

Sarah E. Alexander, President Emerging Markets Private Equity Association

Emerging Markets Private Equity Association 1055 Thomas Jefferson St. NW, Suite 650, Washington DC 20007 Tel: +1.202.333.8171 www.empea.net About EMPEA

The Emerging Markets Private Equity Asso- ciation (EMPEA) is a non-profit, independent, Executive Editor global industry association that promotes Sarah E. Alexander greater understanding of and a more favor- able climate for private equity and venture Editorial Director capital investing in the emerging markets of Jennifer Choi Africa, Asia, Europe, Latin America and the Middle East. Writing and Research Harrison Moskowitz EMPEA was founded in 2004 with the be- Nadiya Satyamurthy lief that private equity and venture capital can be critical drivers of economic growth Production in emerging markets while simultaneously Blue House generating strong returns for investors. www.bluehouse.us

In support of its mission, EMPEA: © 2009 Emerging Markets Private Equity Association • Researches, analyzes and disseminates authoritative information on emerging All rights reserved. Emerging Markets Private Equity Quarterly Review is markets private equity; a publication of the Emerging Markets Private Equity Association. Neither this publication nor any part of it may be reproduced, stored in a retrieval • Convenes meetings and conferences system, or transmitted in any form or by any means, electronic, mechanical, around the world to promote information photocopying, recording, or otherwise, without the prior permission of the exchange between leading fund manag- Emerging Markets Private Equity Association. ers and institutional investors; Subscriptions • Offers professional development programs For subscription or single issue purchase, visit www.empea.net or email empea@ to enhance knowledge transfer; and, empea.net. Subscription for one year (4 issues) is US$495. EMPEA members receive the Emerging Markets Private Equity Quarterly Review for free. • Collaborates with stakeholders from across the globe. Advertising Opportunities The Emerging Markets Private Equity Quarterly Review offers readers an analytical and factual look at private equity investing in emerging markets. The Quarterly Review features include regional and country market analysis, an overview of current trends in the industry, benchmark data from Cambridge Associates, and guest articles from leading thinkers and practitioners. Become a Member Its readership comprises a broad array of private equity fund managers, The Emerging Markets Private Equity As- institutional investors, service providers, and other key stakeholders in the sociation is the only global body that rep- industry from more than 50 countries. resents the growing industry of emerging markets private equity. As a leading global Advertising opportunities are available for upcoming issues. For more player, EMPEA offers features that meet information, please contact Cristiane Nascimento, Communications and the needs of a broad range of institutions Marketing Manager, at [email protected] or +1.202.333.8171. active in emerging markets, including Gen- eral Partners (GPs), Limited Partners (LPs), EMPEA business associations, service providers, 1055 Thomas Jefferson Street NW, Suite 650 multilateral and academic institutions, and Washington, DC 20007 USA governmental bodies. Tel: +1.202.333.8171 • Fax: +1.202.333.3162 www.empea.net For more information on how to become a member visit www.empea.net or contact Kyoko Terada at [email protected] or +1.202.333.8171.

2 EM PE Quarterly Review Vol V Issue 4, Q4 2009 2009 in Perspective and Predictions for 2010

EMPEA solicited some of the industry’s leading practitioners for their reflections on 2009 and predictions for what lies ahead for emerging markets private equity. The following are a sampling of their views.

2009 Among the Toughest Years in Memory “The fundraising environment has begun to improve but I’m somewhat pessimistic because I expect distributions will Without question, 2009 has proven to be among the most difficult continue to fall below expectations. Private equity globally will have disappointing reported results for several more years, years for fundraising in recent memory. Through September 30th, which will compare unfavorably with improving results from 116 funds had raised US$19 billion versus US$55 billion in capital listed equities and fixed income.” raised by 193 funds during the same period in 2008 (See Exhibit —Tom Barry, President and CEO, Zephyr Management, L.P. 1). Whether LPs were constrained by lack of liquidity to recycle into new commitments, unexpectedly hitting PE allocation ceilings “The majority of institutional investors are going to cut back on as valuations shifted, or merely applying a new level of caution, the their overall allocations to private equity during 2010; we think end result was tighter competition for a shrinking pool of capital. that over the next three or four years there’s likely to be a 20 to 25 per cent reduction in the size of the global private equity “We thought that we were immune to the risks associated with market, against the peak of the boom.” the leverage games being played by many buy-out shops, but —Paul Fletcher, Senior Partner, Actis even those of us who have never played the leverage game have had our fund raising capability slashed drastically. 2009 will be known as one of the most difficult years ever for the industry.” …But the EM Growth Story Translates to a —Scott Swensen, Chairman, Conduit Capital Partners Rising Share of Global PE

“For many LPs, the crisis and resulting liquidity crunch In dollar terms, emerging market funds still represent a small called into question the appropriate allocation to PE. The easy portion of most LP portfolios but a shift in LP thinking underway response was to say ‘no’ to most new commitments.” bodes well for emerging market managers. Investors are com- —James Seymour, Managing Director, EMP Global ing to realize they are under-exposed to high-growth markets, and the accepted wisdom about risk has changed. Global Fundraising Outlook Remains Hazy… EM funds’ share of the global total has risen, from only 5% in Some managers contend that 2009 was the first of several chal- 2004 to 20% of total capital raised as of June 2009, and from 7% lenging years to come. As of November 30, of the 313 funds to 24% of global private equity investment totals over the same launched in 2009, 66 had held at least one close. The outlook period (See Exhibit 2). Some managers predict the EM portion for fundraising in 2010 is unclear, given uncertainty around LPs’ of institutional PE allocations could soon tip into the double digits. ability to commit to new funds (a function of resumed distributions from developed market funds), and how institutions will “Most emerging markets showed relative resilience to the respond to the denominator effect of 2009. downturn. Perhaps institutional investors will begin to approach emerging markets from a new angle, and hopefully this will lead to renewed interest in investing in emerging Exhibit 1: EM PE Fundraising Totals by Quarter, US$B markets private equity.” (No. of funds with closes) —Sev Vettivetpillai, CEO, Aureos Capital 60 “Emerging markets private equity continues to have a compelling value proposition—growth capital for growth ■ Q3 50 companies in growth markets.” ■ US$20B (61) Q2 —Michael Barth, Senior Director, ■ Q1 Darby Overseas Investments, Ltd. 40 “Even in markets where growth slowed, it did not enter negative territory. We’re still in the midst of a long-term consumer and 30 natural resources boom. The fundamentals are still in place.”

US$Billion US$19B (75) —Hisham El-Khazindar, 20 Managing Director and Co-Founder, Citadel Capital US$6B (37)

10 US$5B (27) Intense Focus on Portfolios: Healthier than US$17B (62) Assumed, Improving Exit Prospects US$8B (55) 0 The economic impact on emerging markets in aggregate was less Q3 YTD 2008 Q3 YTD 2009 severe than in the developed markets, and the strength of under- Source: Emerging Markets Private Equity Association. Continued on page 4

EM PE Quarterly Review Vol V Issue 4, Q4 2009 3 2009 In Perspective and Predictions for 2010, continued from page 3

Exhibit 2: EM PE Funds Raised and Investment as Percent Exhibit 3: EM PE Investment Activity (Q3 YTD 2008 vs. of Global Total (US$ Billions) Q3 YTD 2009), US$ Billions (No. of deals) 30% 2008 YTD (Q1–Q3) 2009 YTD (Q1–Q3) China 6.2 (161) 8.5 (155) ■ EM PE Funds Raised as 24% India 6.4 (155) 2.5 (113) % Global Total Other 9.2 (57) 2.7 (48) ■ 20% 20% EM PE Investment as Emerging Asia % Global Total 18% Russia 2.8 (40) 0.2 (18) 15% CEE/CIS ex-Russia 3.4 (68) 0.7 (39) 14% Brazil 1.0 (18) 0.5 (10) 11% 11% 10% LatAm ex-Brazil 2.7 (27) 0.1 (21) 10% 9% 8% 7% MENA 3.4 (53) 1.0 (22) % of Global Total (US$ Billions) % of Global Total 5% South Africa 1.1 (21) 0.7 (18) Africa ex-S. Africa 1.1 (18) 0.3 (11)

0% TOTAL 37.2 (618) 17.0 (455) 2004 2005 2006 2007 2008 1H 2009 Source: Emerging Markets Private Equity Association.

Source: Emerging Markets Private Equity Association. lying portfolios is expected to yield healthy returns. Managers that years when you need to raise a new fund. GPs need to become can demonstrate capable stewardship of their portfolio compa- true relationship managers and be much more imaginative in nies through the crisis have a unique opportunity to drive home the terms they offer; LPs need to find their collective voice to the case for EM PE among LPs aggressively seeking growth. Ad- demand just that.” —Paul Fletcher, Senior Partner, Actis ditionally, managers are encouraged by improving valuations and exit prospects fueled in part by the rebound in the public markets. “An underlying theme in 2010 will be a trend in favor of managers whose strategies embody traditional private equity—building value for investors by working with investee “In South Africa we are seeing clear signs of portfolio valuations companies to improve operations, management and market turning the corner, deal flow picking up, credit becoming reach—instead of returns achieved primarily through available and, not uncharacteristically at this stage in the cycle, financial engineering.” the IPO window starting to open up for exits.” —James Seymour, Managing Director, EMP Global —André Roux, Chief Executive, Ethos Private Equity

“The portfolio companies in Zephyr’s funds, especially in Ignore at Your Peril: Potentially Adverse India and Africa, have had excellent business results. These Effects of Developed Markets Regulation results will translate into excellent returns over time. The key determinant will be the mode of divestment. Strategic sales will Regulation may be a local phenomenon, but GPs caution remain reasonably good while IPOs are the unknown.” against ignoring the events unfolding in developed markets, —Tom Barry, President and CEO, Zephyr Management, L.P. and advocate for clearer thinking about how to improve understanding of the industry among lawmakers and the “We spent all of 2008 and a good part of 2009 focusing exclusively on our platform companies to ensure they would general public. Regulations such as the pending directive not just weather the global storm, but thrive. We expect an concerning alternative investments in the EU, for instance, average 30% growth rate for our mature platforms in 2009.” could inadvertently adversely affect emerging market funds —Hisham El-Khazindar, that market to European LPs. In markets without clear rules Managing Director and Co-Founder, Citadel Capital governing PE, regulators could take their cues from lawmakers in the EU and the US on issues such as fund marketing “Back to Basics” and taxation. “The majority of coverage in the press, and the public’s negative Now that the associated risks of leverage-generated returns opinion of private equity, relates to developed markets, yet are better understood, emerging market investors and manag- this does not mean emerging markets private equity can be ers expect a return to PE fundamentals, i.e., value-add strate- complacent. We need to constantly ask ourselves, how do we gies and a realignment of interests between LPs and GPs. improve? How can we do more? Actis currently employs nearly 85,000 people across its portfolio companies; on their behalf “The rhythm of the LP/GP relationship certainly still needs we need to challenge ourselves to do better, all the time.” to change; it is not acceptable to approach LPs every four —Paul Fletcher, Senior Partner, Actis

Continued on page 5

4 EM PE Quarterly Review Vol V Issue 4, Q4 2009 2009 In Perspective and Predictions for 2010, continued from page 4

Not All Regulation Is Bad: Greater kets, but warn against forgetting the hard lessons of the Liberalization Could Encourage Domestic PE past year.

In a handful of markets, 2009 was a year of significant de- “2009 brought discipline back to the PE industry. The excesses over the past few years fuelled by over-sized funds, velopments in efforts to encourage the growth of domestic easy access to debt, slack regulatory oversight, quick exits private equity, most notably in China. GP-led efforts to effect and greed came to haunt us. The worrying point is that in a change are underway in markets such as India and South Af- few years the lessons learnt in 2009 will be forgotten.” rica. However, in most markets progress has been slow and —Luis Miranda, President & CEO, IDFC Private Equity lawmakers are expected to continue to treat private equity with benevolent indifference. “In the wake of a global recession, investors and businesses are seeking growth, notably in China. There is potential “We have been approached for the first time for advice this for a precarious imbalance given the nascent private equity year by several top government officials who see PE as a potential infrastructure in China and the exuberance of suppliers of way to stimulate growth in non-resource sectors of the economy, capital or their advisors to allocate to China PE. The major which is a priority again after the recent drop in commodity risks are over-sized funds, lower asset quality, strategy drift prices. It is encouraging that they see PE as a priority, but we and asset accumulation, GP personnel turnover, and GP/LP still don’t expect meaningful steps to be taken by the government misalignment.” that would genuinely change investment conditions.” —Philip Bilden, Managing Director, —Mike Calvey, Co-Managing Partner, HarbourVest Partners (Asia) Limited, Hong Kong Baring Vostok Capital Partners ■ The Flipside of Growth: Tread Carefully More information about the individuals cited here and their and Remember the Lessons of 2009 firms’ investment strategies is available in the 2009–2010 EMPEA Membership Directory. If you have not received Emerging market managers and investors remain convinced yours, please contact Kyoko Terada at [email protected] of the enormous growth potential in many emerging mar- or +1.202+333.8171.

EM PE Quarterly Review Vol V Issue 4, Q4 2009 5 Guest Commentary Agribusiness Private Equity: The Fertile Sector

Dalberg Global Development Advisors’ Peter Tynan and Detelina Kalkandjieva contributed the following guest article, the product of their firm’s advisory work on behalf of clients in the agribusiness sector.

Planting the Seed: The Case for Good Growing Conditions: The Global Agribusiness Investing Demand and Supply Imbalance

The agribusiness sector presents investment opportunities far Global population growth—estimated at 9 billion people by beyond farming—from crop and livestock production, through 2050—will test the limits of current food production capabilities, processing, packaging, storage and distribution, to marketing already at a breaking point in markets such as China that depend branded-food products. on food imports. Nearly all of this growth is expected in developing countries, where food demand will be greater in both quan- The scale and diversity of the agribusiness opportunity in emerg- tity and quality due to improvements in living standards and in- ing markets cannot be overstated. “It is difficult to put together comes. Not only is caloric intake per person increasing, but diets a diversified portfolio that doesn’t touch the agribusiness sector will also continue to shift from predominantly cereals-based to somehow, as developing countries have a large portion of their protein-based. For example, in China each person consumed an economies and workforces in the sector,” says Mildred Cal- average of 20kg of meat in 1980 compared with 50kg in 2007. lear, COO of Small Enterprise Assistance Fund (SEAF), a global Additional protein production will tax existing water supplies and emerging markets fund manager that has made approximately crop yields, already straining to meet a surge in demand for bio- 40% of its investments in the sector. fuels crops as renewable energy sources.

The drivers for agribusiness investing align very well with emerg- As with nearly all commodities, food prices have risen dramati- ing market demographic and industrial characteristics: rising and cally during the last decade (See Exhibit 2). Even during the urbanizing populations with growing consumer classes are not 2008–2009 downturn, food prices held at nearly double 2007 only creating more demand for food, but consumer tastes are levels, and in 2009, the FAO food price index increased 94%. shifting towards higher quality foods and more protein-intensive According to the International Food Policy Research Institute, diets. In addition, profound structural inefficiencies—low yields, population pressure alone is expected to drive prices for the high spoilage and waste, fragmented production and distribu- most important global crops substantially higher by 2050: 62% tion, and generally poor infrastructure—make for a robust set for rice, 63% for maize, 72% for soybeans and 34% for wheat. of opportunities from production to food retailing. “The lack of With climate change effects factored in, prices for staples may big integrated [food and agribusiness companies] in the emerg- rise by as much as 130 to 170% by mid-century. ing markets creates many opportunities for private equity to invest in a fragmented space with substantial growth potential,” The global supply-demand imbalance is only expected to inten- observes Richard Gilmore, CEO of the GIC Group, an agribusi- sify, making for attractive economics over the long-term. Ravi ness investment services firm. The agribusiness sector also of- Sood is Chairman of Feronia Inc, an agribusiness investor which fers abundant portfolio diversification options across geography, recently completed the purchase of a 76% ownership stake in commodity cycles, and global economic conditions. Unilever’s 100,000 hectare palm oil plantation in the Democratic Republic of the Congo. Sood summarizes the long-term case for Exhibit 1: Agriculture Sector, Value Added as a % of GDP (2008) the agribusiness sector, noting, “Agriculture provides an econom- 35% ically incentivized commodity: food. People will continue to eat.” 31% 30% Improving the Yields: Strategies to Take 25% 21% Advantage of Inefficiencies 20% 18% Agribusiness investments span three often distinct strategies: 15% 14% 11% production, value chain (including infrastructure and logistics), 10% and inputs/technology. Many investors also find vertically-inte- 7%

Agriculture / GDP, % Agriculture / GDP, grated or branded food companies attractive investments in or- 5% der to capture additional margin and to assume greater control 0% over many of the risks specific to the sector. India Kenya China Brazil Nigeria Production: “Private equity in production agriculture in emerging markets tends to be a combination of actual agriculture and real Sub-Saharan Africa Source: World Development Indicators database. Continued on page 7

6 EM PE Quarterly Review Vol V Issue 4, Q4 2009 Agribusiness Private Equity, continued from page 6 Guest Commentary

Exhibit 2: FAO Food Price Index the fund buys underperforming property where it adds value by 220 land conversion or efficiency improvement,” he adds.

200 Specific risks related to a production strategy include land issues and jurisdiction-specific treatment of property rights, rang- 180 ing from ensuring proper title and transferability to securing 160 buy-in among the local community. Investments in land can be inherently contentious, exemplified by Korean conglomerate 140 Daewoo’s failed 2008 bid for 3.2 million acres in Madagascar. Daewoo sought a 99-year lease on one-third of the island’s ar- 120 able land to cultivate maize for export to Korea. Resulting public

Food Price Index (2002-2004=100) outcry resulted in the Madagascar President’s removal and can- 100 cellation of the deal. J F M A M J J A S O N D Value Chain: Investing in extracting efficiencies from the agribusi- 2005 2006 2007 2008 2009 ness value chain—processing, warehousing, cold storage, logistics Source: Food and Agriculture Organization of the United Nations. and transportation—are the strategic focus of many dedicated agribusiness funds. Value chain investments also appeal to generalist estate play,” according to GIC’s Gilmore. Huge swaths of undevel- private equity funds investing selectively in the agribusiness space. oped arable land are being offered by governments in Africa and These assets provide more stable and often higher returns, so long Latin America, at as little as one-sixth of developed country pricing. as issues like the quality and stability of supply, price discovery, ef- ficient distribution, and branding can be addressed. A number of private equity funds are pursuing a production and land acquisition strategy, particularly in Africa and Latin Robert Peyton, President of Burlington Capital Group’s Emerg- America. Recent additions include Emergent Asset Manage- ing Markets Fund, explains the appeal of mid- and upstream ment and Grainvest’s African Agricultural Land Fund. Altima value chain investments: “Margin consistency is more reliable, Partners has raised a US$675 million One World Agriculture more controllable in terms of business model and there is more Fund, and recently partnered with the IFC to form a US$75 control over production. One of our most successful invest- million fund targeting land and farm operators in developing ments was a broiler production company where we upgraded countries. Pergam Finance’s US$120M Campos Orientales facilities and efficiency, developed the brand, and made a 5–6 Fund was formed in 2006 to buy farmland in the Southern times return on its sale to a large Russian meat company.” Cone of Latin America, mostly in Uruguay, but also in Argen- tina. “Our strategy is to acquire large-scale turnaround farm- Alejandro Quentin, Founder and CEO of Pampa Capital, a Latin ing properties and transform them into a productive portfolio American agribusiness fund manager, sees better upside in of farms, growing a diversified mix of beef, milk and crops,” value chain investments, saying “There is less upside today in remarks Olivier Combastet, Pergam’s Chairman. the purchase of farmland. The space is overcrowded as governments look to secure food production. Farming is a very A production strategy aims for returns based on increased stable business however the returns are very low. Land appre- production through improved agronomic techniques and effi- ciation and operating income aggregate returns are well below ciencies. “Our fund is targeting about a 15% return, a third of 10–15%. However, the risk-return profile changes when looking which would come from improving the yield and two thirds from upstream and downstream. Investing in agribusiness can bring capital appreciation,” explains Pergam’s Combastet. “We avoid 20–25% by professionalizing and consolidating industries which debt. You can’t leverage investment in farming as cash flow is are in the hands of mom and pop types of owners, expanding unpredictable and cash on cash return is not very high. Instead, capacity, and supplying growth capital.”

Exhibit 3: Agribusiness Value Chain

Farm Trade & Wholesale & Distribution & Consumers Inputs Production Distribution Processing Trade Retail Seeds Staples Farm processing Cooperative Land trucking Fertilizer Livestock Consolidated processing Aggregation Ocean freighting Irrigation High-value (exports) Packaging Silos Air freighting Pest mgmt. Horticulture Quality standards & certification Cold storage Ports/roads Land Import subst. Warehousing Contract farming Equipment Branded products

Source: Rabo Equity Advisors, Dalberg. Continued on page 8

EM PE Quarterly Review Vol V Issue 4, Q4 2009 7 Agribusiness Private Equity, continued from page 7 Guest Commentary

Exhibit 4: Sampling of Emerging Market Agribusiness Funds

China represents one market with abundant value chain opportu- zambique, which combines production, processing and transpor- nities around food processing and distribution. In 2009, interest tation assets along a fertile growing region. The Transfarm Africa in China’s dairy sector in particular surged, due in part to attrac- Fund, currently in formation and sponsored by the Hewlett Foun- tive valuations given recent controversies around infant formula dation, has committed to investing up to US$5 million in com- manufacturing. Deals have included Sequoia Capital’s US$63 mil- mercial agriculture projects along the Beira Corridor. lion investment for a 10% stake in Feihe Dairy, and The Car- lyle Group’s investment in Guangdong Yashili Group, one of Inputs/Technology: Another dimension of the agribusiness op- China’s largest infant formula manufacturers. In June 2009, portunity is in inputs and services, including technology related to SAIF Partners injected US$15 million into Yayi International, a yield improvements. Some examples of the latter include Rabo Chinese goat milk formula production and retail brand. In late India Agribusiness Fund’s March 2009 investment in Sri Biotech 2008, Kohlberg Kravis Roberts & Co. invested in Ma Anshan Laboratories India, a Hyderabad-based producer of pesticides and Modern Farming Company for US$150 million in large scale herbicides. In July 2008, Origo-Sino-India PLC alongside Unilever dairy operations. In the summer of 2009, Chinese state-owned Technology Ventures invested US$12 million in Halosource, a wa- firm Cofco and private equity firm Hopu Investment Manage- ter purification technology company based in India. Other inves- ment Co. jointly acquired a 20% stake in market leader Meng- tors see opportunities in seed production and other inputs, such niu Dairy for roughly US$780 million. as chemicals, fertilizers, feed and fodder. Examples include Mor- gan Stanley Private Equity Asia’s US$39 million investment in Bio- SEAF is among the firms that recognize the opportunities in tor Industries, an agro-chemicals manufacturer in India, and The agriculture-related logistics. “Great investment opportunities Carlyle Group’s investment of US$15 million in China Agritech, an are available in transportation and preventing distribution losses, organic fertilizer manufacturer and distributor. Over time, inves- prevalent in the larger markets like India,” SEAF’s Callear noted. tors expect additional opportunities could emerge in agribusiness “You need to invest in transport that can handle the frozen prod- services, including breeding and genetics, farming equipment, uct to get it to market without spoilage. Another investment that leasing, irrigation, satellite farming services, quality testing and can make a big difference is portable cool storage brought close veterinary services. to the farms—early refrigeration or temperature controlled storage can extend the shelf life of produce for weeks.” Global in- Beware the Locusts: Sector-Specific Risks frastructure funds and sovereign wealth funds are looking more seriously at the logistics and transportation needs of the agribusi- Agribusiness investment comes with a host of sector-specific ness sector, searching for opportunities to support large scale risks affecting all parts of the value chain. These risks are most agriculture development. Vertically integrated production regions acute at the production end due to vulnerability to crop diseases are also being seeded, including the Beira Corridor Project in Mo- and weather, particularly storms and drought. “Monsoons are es-

Continued on page 10

8 EM PE Quarterly Review Vol V Issue 4, Q4 2009 Agribusiness Private Equity, continued from page 7

Fund Manager Fund Name Geographic Focus AC Capitales SAFI Agribusiness and Forestry Fund (2008, $50m) Peru Actis Actis Africa Agribusiness (2006, $92.7m) Sub-Saharan Africa Altima Partners Altima One World Agriculture Development Fund (2009, $75m) Africa, Central Asia, CIS Chayton Capital Chayton Atlas Agriculture Fund (raising) Zambia EFG-Hermes Private Equity Horus AgriBusiness Fund (2006, $46m) Egypt Emergent Asset Management/Grainvest African Land Fund (2008, raising) Sub-Saharan Africa GIC Group/Latin America Enterprise Fund 21st Century Latin America Fund (raising, $100m) Latin America Louis Dreyfus Commodities Calyx Agro (2008, $65m) Latin America Mellon Global Investments Brasil Rio Agribusiness FIP (2007, $13m) Brazil Pampa Capital Management Pampa Agribusiness Fund (2007, $150m) South America Pergam Finance Campos Orientales Fund (2006, $75m) Latin America Pharos Financial Advisors Pharos Miro Agriculture Fund (2009, $350m) Eastern Europe, Africa Phatisa Fund Managers African Agriculture Fund (raising, $300m) Africa Rabo Equity Management Company India Agribusiness Fund (2008, $110m) India Resource Partners Resource Eastern European Equity Partners I (2009, $200m) Central & Eastern Europe, CIS Sanlam Private Equity Agri-Vie Agribusiness Investment Fund (2008, $100m) Sub-Saharan Africa Small Enterprise Assistance Funds (SEAF) East Africa Agribusiness Fund (raising), India Agribusiness Fund (raising) East Africa, India Vision Brazil Vision Agro Fundo de Investimento em Participacoes I (2007, $78m) Brazil Agribusiness Private Equity, continued from page 8 Guest Commentary pecially problematic in India, as the country uses primarily rain-fed Harvest Time: Exit Opportunities agriculture,” says Rajesh Srivastava, Chairman of Rabo Equity Advisors, an Indian private equity group focused on the agri- One challenge for investors is aligning the stage of the invest- business sector. ment, particularly on the production end, with the life of a fund and investor expectations. Greenfield land development or re- To mitigate production risks such as weather, investors seek development, e.g., plantation revitalizations, has large upfront geographic and crop diversification, and to structure invest- capital costs difficult to recover within the 5 to 6 year investments to minimize dependence on the production cycle. ment horizon typical of many private equity funds. The most like- SEAF’s Mildred Callear notes that approaches to managing ly paths to exit are operating partner buy-backs, strategic trade against production cycles and attendant price risks include sales, and IPOs in certain markets, in addition to cash dividends “quick-freezing to sell out of season to take advantage of over the life of the investment. higher-prices, or building long-term storage facilities in areas where they have not existed.” Consolidation plays lend well to exit, as vertically integrated enterprises are particularly appealing to potential strategic buyers. Agribusiness also tends to be a heavily protected and reg- “The most appropriate way to exit is a strategic sale. There are ulated sector, which adds an additional layer of transaction large international companies who wish to tap into the market cost and unpredictability. “Superimposed on local production and are interested in homegrown companies,” says Rabo Eq- variables are regional and country-wide regulatory interven- uity’s Srivastava. tions that invariably impact on the return on agricultural investments, resulting perhaps in greater uncertainty than in As the IPO window appears to be re-opening once more in other private equity sectors,” says GIC’s Gilmore. emerging markets, agriculture companies could prove attractive candidates for listing. According to Joachim Schumacher and Investors in upstream processing and logistics stress the im- Karl Weinfurtner of DEG, the German development finance in- portance of securing long-term supply contracts for inputs, stitution with over €1.5 billion in agribusiness investments over and diversification across production regions. Mitigating com- the last two decades, “In China the IPO exit is promising, par- modity cycle pricing risk is also important. Many investors ticularly for branded food product companies.” Pampa’s Quen- look for strong price discovery through long-term contracts tin sees room for greater appetite for exposure to agricultural with traders, or supermarket, hotel, and other food retail buy- companies, which account for 25% of GDP or more in some ers. Vertical integration is another risk mitigation strategy markets. “We will see more and more IPOs as the demand common among investors in agribusiness, not only to capture from investors for liquid investment vehicles in the agribusiness margin but also to increase direct control over multiple risks space increases,” says Quentin. ■ and inefficiencies along the value chain. Foreign exchange risk, while an additional source of exposure for export-orient- About the authors: Peter Tynan is Partner and Head of Global ed businesses, can alternatively offset exposure to local price Access to Finance, and Detelina Kalkandjieva is a Consultant volatility. “We look for very high export ratios in our deals, with Dalberg Global Development Advisors, a global strategy which helps create a natural hedge in currency positions,” and financial advisory firm which focuses on emerging and explains GIC’s Gilmore. frontier markets.

Exhibit 5: Sampling of Agribusiness Deals in 2009 Total Investments Total Investment Investment Fund Manager Company Company Type to Date (USDM) Equity Stake Date Destination Hopu Inv. Mgmt./COFCO China Mengniu Dairy 785 20% Jul-09 China Dairy IGNIA Partners Pro-Organico S.A.P.I. Produce 3 N/A July-09 Mexico Jiuding Capital Baiyang Haiwei Seafood 12 N/A Sep-09 China Seafood NBK Capital Kilic Denez Aquaculture 15 N/A Jun-09 Turkey Rabobank International Sri Biotech Fertilizer 9 N/A Mar-09 India SAIF Partners Yayi International Infant formula 15 N/A Jun-09 China Sequoia Capital China Feihe Dairy Infant formula, nuts 63 9% Aug-09 China The Carlyle Group China Agritech Fertilizer 15 17% Oct-09 China TriNorth Capital / Feronia Inc. Plantations et Palm oil N/A 76% Sep-09 DRC (Congo) Huileries du Congo

Source: EMPEA, Dalberg research.

10 EM PE Quarterly Review Vol V Issue 4, Q4 2009 Agribusiness Private Equity, continued from page 8

A leading private equity investor in the emerging markets

As economies in Asia, Africa and Latin Actis has completed several landmark America develop scale and influence in deals in China: the global economy, Actis continues to Ambow Education: Led the investment use expertise and capital to transform of US$103m in one of the top brands private sector companies into world in China’s rapidly expanding education class enterprises. industry. Much of the economic growth in emerging 7 Days Inn: Led the investment of markets can be linked to three major trends US$65m in the fastest-growing player that drive the way Actis does business: in China’s budget hotel industry. investment in domestic infrastructure, growing financial services, and rising Xiabu Xiabu: Invested US$51m for personal wealth and consumption. a majority stake in Beijing’s top hot-pot chain.

www.act.is Inaugural Private Equity in Africa Executive Summit—London

Financial Times Global Events (FTGE) in partnership with EMPEA and This is Africa magazine presented a one-day executive summit entitled Private Equity in Africa at the London Stock Exchange on November 2nd, 2009. Designed to support limited partners (LPs) in their efforts to better assess the investment opportunities presented by private equity in Africa, the sold-out summit brought together leaders in government as well as senior industry representatives from many of the top private equity fund managers and LPs en- gaged in African private equity.

Headlining the summit were political heavyweights Tony Blair, For- mer Prime Minister of the United Kingdom, and H.E. Paul Kagame, President of the Republic of Rwanda. Tony Blair set the stage for the day in his introductory remarks by encouraging investors to recognize that now is the right time to invest in Africa and pointed to a number of compelling reasons for investors to consider including the continent’s high economic growth, increased macroeconomic stability, largely untapped markets, availability of natural resources and improving corporate governance. In the keynote address, H.E. Paul Kagame outlined the progress that had been made throughout Africa, 1 detailing Rwanda’s efforts to create a more business and investor friendly environment. President Kagame also emphasized Rwanda’s keen interest in new partners, particularly private investors looking for innovative investment opportunities and healthy returns.

1. Keynote speaker H.E. Paul Kagame, President of the Republic of Rwanda. 2. Tony Blair, Former Prime Minister of the United Kingdom encouraged investment in Africa in his video introductory remarks. 3. Ahmed Heikal, Citadel Capital, Miles Morland, Development Partners International and Blakeney Management and Peter Schmid, Actis, in an engaging conversation on “What Private Equity Investors Must Know About Africa.” 4. The event’s participants included the senior-most leaders of firms active in Africa such as Tom Barry, Zephyr Management; Yvonne Bakkum, FMO; and Nana Osei-Bosu, Ghana Venture Capital Trust, among others. 2

3 4

Continued on page 14

12 EM PE Quarterly Review Vol V Issue 4, Q4 2009

Africa Overview, continued from page 12

6 7

The day was characterized by a number of lively panel discussions on the opportunities and challenges of private equity investing in Africa, with additional speakers and contributors including Peter Schmid, Partner and Head of Africa at Actis; Ahmed Heikal, Chairman of Citadel Capi- tal; Miles Morland, Chairman of Development Partners In- ternational and Blakeney Management; Tom Gibian, Chief Executive Officer of Emerging Capital Partners; and Tom Barry, CEO of Zephyr Management, to name a few. A full spectrum of topics was addressed, from the unique role of development finance institutions to the opportunity set for small and medium sized enterprises. The day concluded with a debate on which sectors are driving the continent’s growth story.

A prominent theme of the summit was that the percep- tion of risk isn’t always reality. Several speakers emphasized that investors still hold many misconceptions of Af- rica and are therefore at risk of missing great opportunities in new sectors such as services, logistics, manufacturing and financial services. The growing importance of Africa’s consumer middle class was also reiterated, as consumer habits will drive promising sectors for investment. One speaker noted that executing deals in more developed 8 markets such as China and India often require you to pay double digit multiples in the face of strong competition, 5. Roderick Evison, CDC Group; Martin Poulsen, African Development Bank; Jurgen while one can take a stake in a market leader in Africa with Rigterink, FMO; Holger Rothenbusch, DEG; and David Wilton, IFC; at the panel entitled: high growth rates at a more attractive price. As Cordiant “Super LPs: The Unique Role of the DFIs in African Private Equity.” 6. Paul Tierney Jr., Development Capital, moderated a panel on the LP perspective on Capital’s David Creighton remarked, Africa presents a “per- factors that determine willingness or ability to increase exposure to African PE. ception arbitrage” opportunity for well-informed private eq- 7. The inaugural PE in Africa Summit was a major success, selling out all available seats uity investors. In short, the overriding sentiment through- weeks prior to the event. out the day was that Africa has the potential to become the 8. Carlos Perry, Chief Operating Officer, EMPEA, and Chairman of the event, led the day’s ■ proceedings. next great private equity frontier.

14 EM PE Quarterly Review Vol V Issue 4, Q4 2009 1 2 3 4

More than 300 industry delegates convened in London for the 5th Annual Emerging Markets Private Equity Forum, co- hosted by EMPEA and PEl, to compare notes on the key challenges and opportunities facing the industry following the global credit crunch. Featured speakers included Charles R. Kaye, Co-President of Warburg Pincus, Paul Fletcher, Senior Partner of Actis, and Juan Delgado-Moreira, 5 6 Managing Partner of Hamilton Lane. The interactive Forum featured a number of returning crowd favorites such as ‘The 1. Keynote speaker Chip Kaye, 5. Attendees at the Forum’s evening Big Debate,’ which this year challenged the status quo of Warburg Pincus. cocktail reception. 2. Graham Thomas, Standard Bank. 6. Attendees during networking sessions at the EM PE model, and also included new features such as 3. Sev Vettivetpillai, Aureos. the Forum. an LP Clinic designed to provide guidance to emerging mar- 4. Roger Leeds, EMPEA. ket fund managers. ■

EM PE Quarterly Review Vol V Issue 4, Q4 2009 15 Beijing nd China World Hotel Annual (Shangri-La) 8-9 November 2009 Thanks to supporters, media partners and 2 supporting associations Beijing Global Private Equity Forum Thanks to sponsors, media partners and supporting organizations The 2nd Annual Beijing Global Private Equity Forum, or- ganized by the Emerging Markets Private Equity Associa- tion and the Beijing Private Equity Association, convened leading private equity professionals from China and other global markets along with high-ranking Chinese government officials. Speakers discussed the significant role private equity is playing in promoting economic development in China and the strong potential the asset class has to flourish in the still underpenetrated market. Highlight pan- els includedLead supporters discussions on the importance of private equity during the global financial crisis, the emergence of the RMB-denominated fund market, and global deployment of Chinese capital through private equity. 1

Speakers from premier local and international private equity firms included David Rubenstein of The Carlyle Group, John Zhao of Hony Capital, Fang Fenglei of Hopu Invest- ments, and Zhang Yichen of CITIC Group. The Forum also featured senior representatives of prominent Chinese and international institutions such as the National People’s Congress, supportersAdditional National Council for Social Security Fund, China Investment Corporation, and CalPERS. ■

1. David Rubenstein, The Carlyle Group. 4. (Right) Sarah Alexander, EMPEA. 2. Joncarlo R. Mark, CalPERS. 5. Fang Fenglei, BPEA and HOPU 3. Rebecca Xu, Asia Alternatives. Investments. 2

Media partners T&I ASIA with: In association association In

3 4 5

16 EM PE Quarterly Review Vol V Issue 4, Q4 2009 Thanks partners and supporting organizations andsupporting partners 2 In association Media partners Additional supporters Lead supporters with: Thanks to supporters, media partners and mediapartners Thanks to supporters, Annual Beijing GlobalPrivateEquityForum nd to sponsors, media tosponsors, T&I ASIA supporting associations supporting (Shangri-La) China WorldHotel Beijing 8-9 November2009 Submit news on funds launched & closed to [email protected] Funds Launched & Closed (Details on the back of this publication)

Sampling of Emerging Markets PE Funds Launched (YTD2009) PE Firm Fund Name (Target/Size) Geographic Focus Fund Focus 2bCapital 2bCapital Fund* (US$278m) Brazil Growth/Expansion Adveq/Dalian United RMB Fund of Funds* China Fund of Funds ARM Capital Partners ARM Private Equity Nigeria, West Africa Growth/Expansion Beltone Private Equity Beltone/Kenana Sugar Co. Infrastructure Egypt, Sudan Infrastructure Fund (US$1B) HBG Holdings HBG Special Opportunities Fund I MENA, South Asia Growth/Expansion (US$150m) IL&FS Investment Managers Ltd. Urban and Social Infrastructure Fund India Infrastructure (US$200m) Invest AD MENA Fund* (US$400m) MENA, Turkey Growth/Expansion Kazyna Capital Management, Kazakhstan Capital Kazakhstan Distressed Debt European Bank for Reconstruction Restructuring Fund and Development (EBRD) Leopard Capital Leopard Sri Lanka Fund (US$100m) Sri Lanka Growth/Expansion Milestone Religare Investment India Build-Out Fund I (US$137m) India Education, Healthcare Advisors Rogers Investment Advisors Wolver Hill Asia Emerging Manager Asia Fund of Funds Fund (US$250m) Saigon Asset Management (SAM) Vietnam Fund* (US$100m) Vietnam Growth/Expansion Swicorp Swicorp Intaj Capital II (US$400m) MENA, GCC Growth/Expansion Swiss Investment Fund for Emerging Emerging Markets Opportunity Fund Emerging Markets Fund of Funds Markets (SIFEM) (US$300m)

Sampling of Emerging Markets PE Funds Registering Closes (YTD2009) Funds Raised PE Firm Fund Name (Target/Size) Geographic Focus Fund Focus to Date (Status) Actis Actis Infrastructure Fund II Sub-Saharan Buyout US$754m (Final) (US$754m) Africa, South Asia, Southeast Asia ARX Equity Partners ARX CEE III (US$187m) Central & Eastern Buyout US$138m (Second) Europe Aureos Capital Aureos Africa Fund (US$400m) Sub-Saharan Africa Growth/Expansion US$324m (Second) Beltone Private Equity Beltone Midcap Fund–Egypt Sub Egypt Growth/Expansion US$30m (First) Fund (US$100m) Cartica Management, Emerging Markets Fund Global Emerging Growth/Expansion US$200m (First) LLC Markets (primarily listed) CDH Investments CDH Fund IV (US$1.4B) China Growth/Expansion US$750m (First) CIMB Standard Islamic Infrastructure Fund (IIF) Asia, Central Asia Growth/Expansion US$262m (First) (US$500m) GroFin Capital GroFin Africa Fund (US$170m) Sub-Saharan Africa Venture Capital US$170m (Final) Lighthouse Funds India 2020 Opportunity Fund India Venture Capital US$104m (Final) (US$104m) Spring Capital Asia Spring Capital Asia Fund China Growth/Expansion US$151m (First) WAMEX Private Multinational Industrial Fund II Mexico Growth/Expansion US$44m (First) Equity Management (US$150m)

*Exact fund name unknown.

18 EM PE Quarterly Review Vol V Issue 4, Q4 2009 Sustainable Results

Global Environment Fund (GEF) has been investing private equity on a global basis in the energy and environmental services sectors since 1990. The firm manages over $1 billion in capital for leading institutional investors from around the world.

5471 Wisconsin Avenue Chevy Chase, MD 20815

globalenvironmentfund.com Emerging Markets Private Equity Performance

While the effects of the financial crisis continue to impact global Recent improvements in performance coincided with the private equity and venture capital fund performance, Cambridge rebound in public markets, and in some part likely reflect Associates’ most recent benchmark statistics as of June 30, 2009 the mark-to-market effects on carrying values of unrealized reveal improved returns across most regions in comparison to portfolios. Returns from EM PE and VC funds outstripped the prior quarter. As of June 30, 2009, emerging markets venture both the MSCI EM Index and the S&P Index for the one- capital and private equity (EM VC and PE) funds in the Cambridge and three-year periods ending June 30. Private equity as an index generated one-year net IRRs of -17.6%, up from -31.8% asset class has outperformed the S&P 500 across all time as of December 31, 2008 and -28.7% as of the end of the first periods measured. quarter. Asia, Latin America and CEE/Russia all demonstrated improved performance, with the Asian index showing the greatest EMPEA members can access the latest Cambridge Bench- improvement in one-year returns with a net IRR of -11.67% as of mark statistics though the members-only website. Please June 30, 2009 versus -25.69% as of March 31, 2009. contact [email protected] for assistance. ■

Emerging Markets PE & VC Performance (as of 30 June 2009)

60%

40%

20%

0% % IRR, net Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 -20% 1 Year 3 Years 5 Years 10 Years -40%

Source: Cambridge Associates LLC Proprietary Index: pooled end-to-end returns, net of fees, expenses and carried interest.

Comparative End-to-End Returns by Region (as of 6/30/2009) Index One Year Three Year Five Year Ten Year Emerging Markets VC & PE -17.55 5.53 11.44 5.43 Asia (ex Japan) PE -11.67 4.83 7.48 4.56 CEE & Russia PE -41.70 2.12 22.08 14.08 Latin America & Caribbean PE -21.81 13.28 18.32 0.34 MSCI Emerging Markets -27.82 3.27 15.08 9.02 US VC -17.10 1.31 5.68 14.32 US PE -20.61 0.91 9.92 7.65 Western Europe PE -36.87 2.11 17.93 16.73 S&P 500 -26.22 -8.22 -2.24 -2.22

Source: Cambridge Associates LLC Proprietary Index: pooled end-to-end returns, net of fees, expenses and carried interest.

20 EM PE Quarterly Review Vol V Issue 4, Q4 2009

Submit your news to [email protected] Member News (Details on the back of this publication) Asia

Baring Private Equity Asia has invested US$42 million in Chi- panies in the growth phase. The fund is targeting commitments nese computer-aided engineering software developer PERA totaling US$100 million. Global and separately acquired a 16.5% stake in Hsu Fu Chi Inter- national, a Singapore-listed confectionary maker in a deal valued Kohlberg Kravis Roberts & Co. (KKR), sovereign wealth fund at approximately US$135 million. The firm also announced the Government of Singapore Investment Corp. and Chinese invest- successful IPO of portfolio company Yingde Gases, one of the ment bank China International Capital Corp. have jointly acquired a largest industrial gas suppliers in China, on the Hong Kong Stock 30% stake in China’s International Far Eastern Leasing, a financial Exchange. leasing firm, for approximately US$160 million. KKR’s share of the investment is approximately US$100 million. U.S.-based Capital International sold its 11% stake in Indian software developer MindTree for US$47 million. The Franklin India Vietnam-based private equity firm Mekong Capital is raising its High Growth Companies Fund, the Franklin India Taxshield Fund fourth fund, which will focus on Vietnam’s consumer-driven sec- and the Franklin India Flexi Cap Fund are among the investors that tors. The fund is targeting commitments totaling US$150 million. bought Capital’s shares, which were acquired in 2001. Asia-focused private equity firm Navis Capital will acquire Vion CIMB Standard Strategic Asset Advisors, a private equity firm Food Group’s Thailand-based subsidiary, Grampian Foods Siam. owned by South Africa’s Standard Bank and Malaysia’s CIMB The value of the transaction was not disclosed. Group, plans to increase its Islamic infrastructure fund to the target size of US$500 million. CIMB Standard has also acquired Babcock CEE/CIS & Brown’s interest in the Babcock & Brown Asia Infrastructure Fund. The value of the transaction was not disclosed. Private equity firmAdvent International is acquiring a 75% stake in Bulgarian water bottler Devin from Austria’s Soravia Group. The U.S.-based private equity firm Global Environment Fund (GEF) deal is valued at approximately US$32 million. has invested US$46.3 million in Greenko, one of India’s largest independent power producers focused exclusively on renewable Global private equity firm The Carlyle Group is acquiring a 40% energy generation. The investment was made through the Global stake in Turkish Medical Park Hospital Group, which operates 11 Environment Emerging Markets Fund III and will give GEF up to a hospitals and two hospital complexes across Turkey. The deal is 30% stake in Greenko. valued at approximately US$100 million.

Henderson Equity Partners, the private equity operation of as- The European Bank for Reconstruction and Development set management firm Henderson Global Investors, has invested (EBRD) will commit up to EUR10 million to a fund managed by US$17 million in Genesis Colors, an Indian fashion house. Hen- Eurasia Capital Partners, a private equity firm focused on buyouts derson Equity Partners’ Asia team has offices in Singapore, Hong of small and midsize companies in Turkey. The fund is targeting Kong and New Delhi and is opening an office in Beijing. total commitments of EUR60 million.

ICICI Venture Funds Management, the private equity arm of In- Horizon Capital, a private equity firm that focuses on investments dia’s ICICI Bank, has completed the first close of its latest fund, in Ukraine, Moldova and Belarus, has sold its controlling stake in India Advantage Fund Series 3, at US$250 million. The fund is tar- Natur Bravo, the leading fruit and vegetable processor in Moldova. geting commitments totaling up to US$800 million. Horizon Capital additionally sold a controlling stake in Music Televi- sion, the owner of the MTV Ukraine television channel, to the In- IDFC Private Equity has acquired BP Energy’s wind power business ter Media Group for an undisclosed value. Both transactions were in India. The deal is valued at approximately US$95 million, including made through Horizon’s Emerging Europe Growth Fund. US$37 million in cash and the assumption of debt. The transaction was made through IDFC’s wholly-owned unit Green Infra Ltd. Russia Partners, the Moscow-based private equity subsidiary of Siguler Guff & Company, has acquired a 3.3% stake in Russia’s Private equity firm IL&FS Investment Managers has raised MDM Bank for an undisclosed amount. The investment will be US$640 million in commitments for an infrastructure fund es- made through Russia Partners’ new US$600 million fund. tablished in a joint venture with Standard Chartered Bank. The Standard Chartered IL&FS Asia Infrastructure Growth Fund is tar- Templeton Asset Management will acquire a 5% stake in geting total commitments of US$800 million and will invest in high- Grindeks, Latvia’s leading pharmaceuticals manufacturer. The val- growth infrastructure assets in rapidly expanding Asian markets, ue of the transaction was not disclosed. primarily in India and China. Latin America Leopard Capital Sri Lanka, a joint venture between Orion Capital Partners in Sri Lanka and Hong Kong-based Leopard Capital, has Emerging markets-focused private equity firm Aureos Capital is launched a private equity fund that will focus on Sri Lankan com- investing up to US$10 million in ITS InfoComunicacion, a Costa Continued on page 23

22 EM PE Quarterly Review Vol V Issue 4, Q4 2009 Member News, continued from page 22

Rican provider of IT services. The investment will be made through EFG-Hermes Private Equity, the private equity arm of EFG the Aureos Latin America Fund. Hermes, is set to launch an Egypt-focused infrastructure fund in the first quarter of 2010. The fund is targeting commitments total- Brazil-based investment bank BTG Pactual has acquired a 100% ing US$600 million. stake in Farmais Franchising, an operator of drugstore chains in Brazil. The value of the transaction has not been disclosed. BTG The European Investment Bank (EIB) will commit up to US$15 Pactual is additionally investing approximately US$174 million in million to the MENA Joint Investment Fund managed by Egypt- ERSA, a Brazilian company dedicated to renewable energy. based private equity firm Citadel Capital. The fund is targeting commitments totaling US$500 million and will make investments Darby Overseas Investments, the private equity arm of U.S.-based in the Middle East and North Africa. Franklin Templeton Investments, has partnered with the Brazilian unit of French bank BNP Paribas to establish private equity operations in GCC-based buyout firm GrowthGate Capital will acquire a 30% Brazil. Both companies will be committing capital to the new venture. stake in Rubicon, a local digital content production and animation company. The value of the transaction was not disclosed. DLJ South American Partners, an independently-owned and -managed firm, in which Credit Suisse is a minority shareholder, Sub-Saharan Africa will acquire a 25% stake in Grupo Santillana Ediciones, a leading provider of textbooks in Latin America, from Spanish media group Emerging Capital Partners (ECP), a private equity firm focused on Prisa. The transaction is valued at approximately US$362 million. Africa, has invested US$25 million in Wananchi Group Holdings, a leading East African media and telecommunications company special- AIC International Investments L.P., the general partner of AIC Carib- izing in pay-television and high-speed Internet services in Kenya and bean Fund, has announced its name change to Portland Private Tanzania. The investment is ECP’s tenth in Africa’s telecom sector. Equity L.P. Based in Barbados, Portland Private Equity is a private equity fund management company focused on opportunities in the Ca- U.K.-based CDC Group has committed US$5 million to a private ribbean region through its management of the AIC Caribbean Fund. equity fund focused on Sierra Leone. The Sierra Investment Fund (SIF), managed by West African fund manager ManoCap, will Quilvest, the investment institution of Argentina’s Bemberg brewing invest in small and midsize businesses and is targeting commit- family, has raised US$185 million for a global real estate fund of funds ments of up to US$30 million. (FoF). The FoF, which is targeting commitments totaling US$250 million, has already committed US$10 million to a Brazil-focused fund Citi Venture Capital International has invested US$25 million in and plans to make commitments to other funds targeting invest- provider of global IP services SkyVision Holdings through the Citi- ments in Asia, Europe, Latin America and the United States. group Venture Capital International Africa Fund.

Vision Brazil Investments has closed its debut property fund, South African waste management services provider Wasteman Brazil Real Estate Opportunities Fund, with US$210 million in com- Holdings, a portfolio company of asset management firmMarlow mitments. The fund will focus on office and affordable housing Capital, has acquired Spill Response Team, a local supplier of en- developments in Brazil. vironmental products and specialized hazardous cleaning services. The value of the transaction was not disclosed. Mexico-based WAMEX Private Equity Management has held the first closing of its Multinational Industrial Fund II (MIF II) at Blackstone Group and Warburg Pincus have agreed to sell their US$55 million. The fund will invest in middle-market companies stakes in several oil discoveries off the coast of Ghana through based in Mexico. Through its prior fund, WAMEX has invested in their holdings in Kosmos Energy to Exxon Mobil for US$4 billion. MediAccess, a leading Mexican health care management com- Blackstone and Warburg Pincus initially invested US$300 million in pany, for an undisclosed amount. Kosmos in 2004 and upon the 2008 discovery of the Jubilee field, one of the larger recent finds off the West African coast, they put MENA in an additional US$500 million. Dubai-based private equity firmAbraaj Capital has signed a deal to Industry News fully acquire Riyada Ventures, a venture capital firm based in Jordan. To be renamed Riyada Enterprise Development Company, the firm Cartica Management, LLC, an asset manager focused exclu- will focus on investments in small and midsize businesses in the sively on emerging markets, has launched the world’s first global region. Abraaj plans to commit US$200 million of its own capital. emerging markets corporate governance fund. The fund held its first close with over US$200 million in commitments. Private equity firm Citadel Capital has launched a microfinance company in Egypt in conjunction with Egyptian Gulf Bank to help Private equity firm Actis has held the final close of its Actis Infra- provide low and middle income groups with access to financing structure 2 Fund with commitments totaling US$750 million. The and financial services. The microfinance company, Tanmeyah, fund will invest in power and transportation assets in Africa, Asia is 51% owned by Citadel Capital’s platform company for invest- and Latin America. ■ ments, Finance Unlimited.

EM PE Quarterly Review Vol V Issue 4, Q4 2009 23

Submit news on exits to [email protected] Notable EM PE Exits & IPOs (Details on the back of this publication)

Portfolio Year of Capital Date Country Company Name PE Firm(s) Sector Investment Invested of Exit Exit and Return Details Argentina EMDERSA CoInvest Argentina SA-led Electric utilities 2005 Sep-09 Strategic sale of 57% stake to AEI Utilities consortium for US$92m Brazil BuscaPe Great Hill Partners E-commerce 2005 Sep-09 Strategic sale of 91% stake to Naspers for approx. US$340m

Brazil CETIP Advent International Financial services 2009 US$171m Oct-09 IPO on the Sao Paolo Stock Exchange with proceeds totaling US$512m

China Bosideng HSBC Private Equity (Asia) Textile manufacturing 2006 US$70m Sep-09 Secondary sale of 2.77% stake to IDG International Holdings Capital Partners for US$31m

China Dynamic Colours SEAVI Advent, Fortis Chemicals 2004 Aug-09 Strategic sale to Intraco for US$7m Private Equity Asia China Foshan Saturday Legend Capital Retail 2007 US$5m Sep-09 IPO on the Shenzhen Stock Exchange with proceeds totaling approx. US$131m China Guangdong Chaohua Shenzhen Oriental Fortune Technology 2007 US$5m Sep-09 IPO on the Shenzhen Stock Exchange Technology Capital

China Lenovo Mobile Hony Capital Telecommunications 2008 US$45m Dec-09 Strategic sale back to former owner Lenovo Group for US$200m; nearly 2x return

China Shineway Group Goldman Sachs Food & beverage 2006 Nov-09 Secondary sale of half of stake to CDH Investments for US$150m: approx. 4x return

China Yingde Gases Baring Private Equity Asia Oil & gas 2006 Nov-09 IPO on the Hong Kong Stock Exchange with proceeds totaling approx. US$409m

Czech Palma-Tunys Slavia Capital Retail 2007 Aug-09 Strategic sale to Polish retail company Zabka Republic Egypt ASEC Holding, United Citadel Capital Industrial materials Dec-09 Strategic sale of 6% stakes in ASEC and Foundries Company United Foundries to Emirates International Investment Company for US$55m Ghana Kosmos Energy Warburg Pincus, Oil & gas Oct-09 Strategic sale to Exxon Mobil for US$4B+ assets Blackstone Group India Adani Power 3i Group Power 2007, 2009 US$242m Jul-09 IPO on BSE and NSE with proceeds totaling US$623m India Financial Software & The Carlyle Group Payment systems 2001 US$10m Aug-09 Secondary sale of 34% stake to New Systems (FSS) Enterprise Associates and Jacob Ballas Capital India India Manipal Acunova IL&FS Investment Healthcare 2006, 2007 Dec-09 Sale; 20.5% IRR, 1.94x return Limited (MAL) Managers Limited India Mphasis Baring Private Equity India Information 1998 Sep-09 Share sale of 2.1% stake for approx. technology US$38m

India Thermax SAIF Partners Engineering & 2008, 2009 US$15m Sep-09 Share sale on the Bombay Stock Exchange; construction more than 2x return India Travelguru Battery Ventures, Sequoia Information 2006 US$25m Sep-09 Strategic sale to Travelocity Capital India technology Singapore Avago Technologies Kohlberg Kravis Roberts Semiconductors 2005 US$2.7B Aug-09 IPO on Nasdaq with proceeds totaling (KKR), Silver Lake US$650m

Singapore MediaRing GGV Capital, NewSmith Telecommunications 2005 US$24m Sep-09 Strategic sale to Spice Innovation Capital Partners Technologies; est. 9% return South Korea TheFaceShop Affinity Equity Partners Consumer 2005 US$69m Nov-09 Strategic sale to LG Household for US$363m Sri Lanka MillenniumIT Aureos Capital Computer software 1996 US$1m Oct-09 Strategic sale to the London Stock Exchange for US$30m Taiwan Kbro The Carlyle Group Cable TV 2006 Sep-09 Share swap for a 15.5% stake in Taiwan Mobile** Ukraine MTV Ukraine Horizon Capital Media 2007 Oct-09 Strategic sale to Inter Media Group Vietnam Hilton Hanoi Opera VinaCapital Investment Hotels 2006 Sep-09 Sale of 70% stake; 23% IRR Hotel Management Vietnam Tan Dai Hung Mekong Capital Industrials 2003 Aug-09 Share sale on the Ho Chi Minh Stock Exchange

*Transaction is pending government approval **Transaction is pending shareholder and regulatory approval

EM PE Quarterly Review Vol V Issue 4, Q4 2009 25 EMPEA Members as of December 2009 Premier Members Abraaj Capital Limited* DEG* IL&FS Investment Managers* Abu Dhabi Investment Authority Delta Private Equity Partners* International Finance Corporation* Actis* Denham Capital Management Japan Bank for International Cooperation Advent International* Development Bank of Southern Africa (JBIC) AIG Capital Partners* Dubai International Capital Kohlberg Kravis Roberts & Co. Akin Gump Strauss Hauer & Feld* EFG-Hermes Private Equity* Norton Rose* Alfa Capital Partners Emerging Capital Partners* O’Melveny & Myers Asian Development Bank* EMP Global* Orrick, Herrington & Sutcliffe Baring Private Equity Asia* Ethos Private Equity* Quilvest* Baring Vostok Capital Partners* Eton Park Capital Management* Shearman & Sterling BTG Pactual European Investment Bank* SHUAA Partners* Capital International Private Equity Export Development Canada* SIFEM* Funds (CIPEF)* FMO-Netherlands Development Finance SigmaBleyzer* Capital MS&L Company* Siguler Guff & Company* The Carlyle Group* Global Capital Management* SJ Berwin* Cartica Capital Global Environment Fund * Standard Bank Private Equity CDC Group* GP Investments* SVG Advisers* China New Enterprise Investment HarbourVest Partners Swicorp* Citadel Capital Hony Capital Warburg Pincus International* Clearwater Capital Partners* ICICI Venture Funds Management White & Case* Clifford Chance* Company* Zephyr Management* Conduit Capital Partners* IDFC Private Equity* Debevoise & Plimpton* IFC Asset Management Company * EMPEA’s founding Charter Members. Full Members 7L Capital Advisors Capitalworks Equity Partners GIMV AB Capital Centras Capital Great Circle Capital AB Invest CICapital Private Equity GrowthGate Capital Corporation Absa Capital Private Equity CIMB Standard Strategic Asset Advisors HBG Holdings Access America Investments Citi Venture Capital International Henderson Equity Partners ACCION Gateway Family of Funds CoInvest Argentina Horizon Capital Advanced Finance and Investment Group Confrapar Participações e Pesquisas Horizon Equity Partners African Capital Alliance Cordiant Capital Hupomone Capital Partners Singapore AIC International Investments CRG Capital I&P Management (Indian Ocean) AIF Capital CSI Capital Icentis Capital Albright Capital Management DAC Management IDFC Project Equity Co. Alothon Group Darby Overseas Investments IDG Ventures India Alta Growth Capital Development Partners International India Equity Partners Altira Discovery Americas Capital Partners International Housing Solutions ARM Capital Partners DLJ South American Partners Investec Asset Management Artesia Capital Management Duet Group Ithmaar Bank Asia Mezzanine Capital Advisers East Africa Capital Partners JS Private Equity Asian Tiger Capital Partners Eastgate Capital Group Kingdom Zephyr Africa Management Assetswise Capital Emerging Energy & Environment Leopard Capital Aureos Capital Environmental Investment Partners & CWP Lereko Metier Capital Growth Fund Avigo Capital Partners Eurasia Capital Management Lighthouse Funds Axxess Capital Everstone Capital Lombard Investments Baird Asia Advisors Evolvence India Life Science Fund Madagascar Development Partners Baninfo Capital EVU Management Marlow Capital Beltone Private Equity Fidelity Capital Partners Marshall Capital Partners Blackthorn Capital Partners Finansa Fund Management Marshall Fund Blue River Capital Finlombarda Gestioni SGR Mekong Capital Brait Private Equity FIR Capital Partners Mobius Sustainable Financing BTS Investment Advisors Foursan Group National Venture Capital Capital Invest Frontier Investment & Development Partners Navis Capital Partners Capital Trust Gávea Investimentos NEVEQ Capital Partners Full members include private equity fund managers. Continued on page 27

26 EM PE Quarterly Review Vol V Issue 4, Q4 2009 EMPEA Members, continued from page 26

Full Members (continued) Nine Rivers Capital Management Shoreline Capital Management Travant Capital Partners NSG Capital Administração de Recursos SkyBridge Global Partners Tuninvest Finance Group Och-Ziff Capital Management Group Small Enterprise Assistance Funds UFG Private Equity Paladin Realty Partners SOAR Management Venture Capital Trust Fund Pan African Capital Group Société Générale Asset Management Venture Investment Partners Bangladesh Pinto America Growth Fund Alternative Investments Venture Partners Botswana Poteza Partners Southern Bridge Capital Verny Investments QInvest Stratus Group Vietnam Investments Group Quadriga Capital Russia Susquehanna Capital Vision Brazil RHEA Investments Templeton Asset Management Wamex Private Equity Management Rio Bravo Investimentos TMG Capital Wolfensohn Capital Partners The Rohatyn Group (TRG) Management Trans-Century Limited Zephyr Peacock Fund I

Full members include private equity fund managers.

Associate Adams Street Partners European Bank for Reconstruction and Natixis Private Equity International Alberta Investment Management Corporation Development Management Alpha Associates Fairview Capital Partners New Market Venture Management AlpInvest Partners Finnish Fund for Industrial Cooperation NORFUND Amanda Capital First Avenue Partners Northgate Capital ANBID—Associação Nacional dos Bancos Georgetown University Investment Office OMERS Private Equity de Investimento Global Strategies Group Overseas Private Investment Corporation Asia Alternatives Advisor Goldman Sachs Paul Capital Partners AxeaGroup & Co. Greenpark Capital Paul Pannkuk Associates Axonia Partners The Gutmann Group PCGI Azerbaijan Investment Company Hamilton Lane PE Consulting Investintoindia Private Barnellan Equity Advisors Howard Hughes Medical Institute Proparco BIO—Belgian Investment Company for Hunton & Williams Public Investment Corporation Developing Countries IDFC Capital (Singapore) Religare Private Equity Boston BioCapital, FZ IDI Emerging Markets Rensselaer Polytechnic Institute C.P. Eaton Partners Jefferies Helix Robeco Private Equity Caisse de dépôt et placement du Québec K2 Investimentos SAVCA CalSTRS KfW IPEX—Bank SikSal Cambridge Associates KPMG Squadron Capital Campbell Lutyens & Co. Kusuntu Partners SVB Capital Canada Pension Plan Investment Board Liberty Global Partners Teacher Retirement System of Texas Coller Capital Magog & Cie TechnoServe Commonfund Capital Middleland Capital Thunderbird Private Equity Center Corporación Mexicana de Inversiones Milbridge Capital Management TozziniFreire Advogados de Capital (FONDO DE FONDOS) MontaRosa Tufts University Investment Office Corporate Connect Morgan Stanley Alternative Investment UMWA Health & Retirement Funds Denning and Company Partners University of Pennsylvania EMAlternatives MVision Private Equity Advisers Value Enhancement International Emerisk National Council for Social Security Fund P.R.C. World Bank Pension Plan Euromed-Capital Forum XT Capital Partners

Associate members include limited partners, fund of funds, service providers and other organizations.

EM PE Quarterly Review Vol V Issue 4, Q4 2009 27 Featured Events EMPEA IFC’s 12th Annual Global Private Cleantech Forum® XXVI Equity Conference in association The Palace Hotel, San Francisco The Emerging Markets with EMPEA 24–26 February 2010 Investor Forum The Ritz-Carlton, Washington, DC ABVCAP Private Equity and Venture Hosted by PEI with EMPEA as 11–12 May 2010 Capital Conference 2010 Strategic Event Partner Sofitel Hotel, Rio de Janeiro The Westin New York at Times Square, Industry 12–13 April 2010 New York City 25–26 February 2010 Private Equity Analyst Outlook Grand Hyatt, New York City AMEXCAP Mexico Private 26–27 January 2010 Equity Conference EMPEA members receive 15% discount In strategic partnership with EMPEA on registration rate. TBD

Submit Your News Information for EMPEA Member News, Funds Launched & Closed and Exits is compiled from submissions to EMPEA and from a range of publicly-available news sources. We encourage firms to submit their information to EMPEA on a regular basis for possible inclusion in the Quarterly Review and to ensure the accuracy of individual firms’ fundraising, investment and exit information in EMPEA’s global emerging market statistics. For more information on how to include your news, or to submit information, please email us at [email protected].

EMPEA 2010 Conference 1-2 page ad.pdf 1 12/23/09 12:19 PM th annual C 2

M 1 Y Returning to Growth: CM Private Equity in Emerging Markets MY CY May 11–12, 2010 CMY The Ritz-Carlton • Washington, DC K Half-Day Latin America & Caribbean Seminar on May 12 For more information, visit globalpeconference.com, contact Holly Freedman at [email protected] or call +1 202-333-8171. Save the Date! Save

28 EM PE Quarterly Review Vol V Issue 4, Q4 2009