Asia’s Private Equity News Source avcj.com February 25 2014 Volume 27 Number 07 EDITOR’S VIEWPOINT Bumper PE deal flow in 2013 flatters to deceive Page 3 NEWS Baring Asia, CalPERS, CDH, EQT, Fosun, GGV, Hopu, IDFC, IFC, INCJ, Kendall Court, Morningside, NSSF, Origo, Samena, Temasek Page 4 ANALYSIS Australia’s mid-market GPs wait patiently for a buyout rebound Page 16 INDUSTRY Q&A HESTA’s Andrew Major and QIC’s Marcus Simpson Page 11 Broken confidences Sebastiaan van den Berg of HarbourVest Partners Are PE players losing sleep over Australia’s super fund disclosure rules? Page 7 Page 19 FOCUS FOCUS Diversity in distress The collective spirit GPs adjust to evolving special situations Page 12 Crowdfunding gains traction down under Page 14 PRE-CONFERENCE ISSUE AVCJ PRIVATE EQUITY AND VENTURE CAPITAL FORUM AUSTRALIA 2014 Anything is possible if you work with the right partner Unlocking liquidity for private equity investors www.collercapital.com London, New York, Hong Kong EDITOR’S VIEWPOINT [email protected] Managing Editor Tim Burroughs (852) 3411 4909 Staff Writers Andrew Woodman (852) 3411 4852 Mirzaan Jamwal (852) 3411 4821 That was then, Winnie Liu (852) 3411 4907 Creative Director Dicky Tang Designers Catherine Chau, Edith Leung, Mansfield Hor, Tony Chow Senior Research Manager this is now Helen Lee Research Manager Alfred Lam Research Associates Herbert Yum, Isas Chu, Jason Chong, Kaho Mak Circulation Manager FROM 2006 OR THEREABOUTS, AUSTRALIA pace during the second half of 2013. A total of Sally Yip Circulation Administrator suddenly became the destination in Asia for GPs nine PE-backed offerings raised record proceeds Prudence Lau focused on leveraged buyout deals. In the space of $2.5 billion, and more offerings are expected in Subscription Sales Executive Jade Chan of 12 months, private equity investment in the the first few months of 2014. country jumped from $2.5 billion to more than Exits and returns are a good thing but the Manager, Delegate Sales Pauline Chen $16 billion. same bull market hasalso contrived to push up Over the next few years, global and regional valuations or at least expectation of business Director, Business Development Darryl Mag firms competed against – and collaborated owners, making value investment more difficult. Manager, Business Development with – top local managers to acquiring plumb The fundraising environment is hardly a Anil Nathani, Samuel Lau Australian assets. The list of targets included ringing endorsement, with Australia-focused Sales Coordinator the great and the good of domestic consumer managers attracting commitments of around Debbie Koo brands, including the likes of Cole Myers and $800 million in 2013, half the previous year’s Conference Managers Borders. There was even an audacious, though total. It does suggest less dry powder coming Jonathon Cohen, Sarah Doyle, ultimately unsuccessful, bid for national carrier into the market but then it is not a particularly Zachary Reff Conference Administrator Qantas. deep market. None of the mid-market GPs closed Amelie Poon The global financial crisis inevitably funds in 2013; two might in 2014. Conference Coordinator dampened that mood and sharply reduced Nevertheless, it seems the stars are not yet Fiona Keung, Jovial Chung banks’ willingness to support large transactions. aligned for Australia to recapture its former Publishing Director Allen Lee However, AVCJ Research’s records indicate that glories – and some might argue this is a good Australia remains an active private equity market. thing, citing the arguably reckless ambition of Managing Director Jonathon Whiteley More than $15 billion was deployed in each of 2006-2007. However, as the markets saturate 2006, 2007 and 2010. Last year a total of $12 and business owners come back to reality, the billion was invested, not touching the pre- opportunity to buy will once again present itself. financial crisis peaks but not a long way off. Private equity investors are lying in wait. Incisive Media Yet for some reason 2013 didn’t really feel Unit 1401 Devon House, Taikoo Place like one of those boom years. The reason for this 979 King’s Road, Quarry Bay, Hong Kong is plain to see when you study the transactions T. (852) 3411-4900 – 2013 was a big year thanks to two large-scale F. (852) 3411-4999 E. [email protected] infrastructure deals, the ports of Botany and URL. avcj.com Kembla, and then the Port of Brisbane. Beijing Representative Office These assets, acquired by large global No.1-2-(2)-B-A554, 1st Building, No.66 Nanshatan, institutional investors – in one case in partnership Chaoyang District, Beijing, with a local manager – accounted for more Allen Lee People’s Republic of China T. (86) 10 5869 6203 than half of the total annual deal flow. Small Publishing Director F. (86) 10 5869 6205 transactions continued to flow but the upper Asian Venture Capital Journal E. [email protected] mid-market firms were, for various reasons, quieter than usual and large-scale corporate private equity buyouts remain patchy. The Publisher reserves all rights herein. Reproduction in whole or in part is permitted only with the written consent of PE managers and advisors link the slower AVCJ Group Limited. investment environment to the robust capital ISSN 1817-1648 Copyright © 2014 markets. In the first half of 2013 a number of GPs busied themselves by making the most of the opportunity to refinance debt packages on more attractive terms. They have also taken advantage of a revival in the IPO markets, which gathered Number 07 | Volume 27 | February 25 2014 | avcj.com 3 NEWS GLOBAL Investors trade GMR Energy managed on a 50-50 basis by Origo and EMFI, an shares for infra exposure affiliate of EWPO CalPERS lowers investment A consortium of investors led by IDFC NSSF joins cornerstones for Alternatives and Temasek Holdings have agreed risk, trims PE allocation to restructure their investments in India’s GMR Poly Culture IPO California Public Employees’ Retirement System Energy (GMRE) by purchasing INR11.4 billion China’s National Council for Social Security Fund (CalPERS), the largest public pension fund in the ($183 million) in convertible preference shares in (NSSF) will commit about $19.8 million as a US with more than $277 billion in assets, will GMR Infrastructure (GMRI). cornerstone investor in Poly Culture’s HK$2.57 reduce its target allocation for private equity from GMRI is a flagship company of industrial billion ($331 million) Hong Kong IPO. Poly 14% to 12%. The move is part of a broader effort conglomerate GMR Group and parent of GMRE. Culture, an auction business unit controlled to lower investment risk. It will issue INR7.9 billion and INR3.5 billion by state-owned Poly Group, plans to sell 77.78 in shares to the Singapore sovereign wealth million shares at HK$28.20-33 apiece. ASIA PACIFIC CDH pays $40m for 20% stake in China gold project IFC puts $25m to Olympus’ CDH Investments will acquire a 20% stake in Asia environment fund Eastern Dragon project, a gold reserve base International Finance Corporation (IFC), the owned by Canadian miner Eldorado Gold investment arm of the World Bank, plans to Corporation, for $40 million in cash.CDH will own invest $25 million in Olympus Capital Asia’s latest a 21.05% interest in Sino Gold Tenya, Eldorado’s pan-regional environment fund. The vehicle has a Hong Kong subsidiary, which indirectly holds the target size of $300 million. company’s 95% interest in Eastern Dragon, CSRC to restructure, AUSTRALIA fund and the IDFC consortium, respectively, via a preferential allotment, as per a regulatory introduce PE department EQT buys I-Med from hedge disclosure. Both parties had previously invested The China Securities Regulatory Commission INR13.9 billion in convertible preference shares in (CSRC) is undergoing a restructuring that will fund owners GMRE in 2010. While the bulk of these holdings see the creation of four divisions to oversee Australian radiology provider I-Med Network will be swapped for shares in GMRI, the investors fast-moving markets, including private equity. Radiology is being sold by its hedge fund owners will retain a residual invesmtent worth INR2.58 The new divisions will cover bond trading, to a consortium led by EQT Partners. I-Med’s billion in GMRE. The transaction means the private equity, innovative businesses, and illegal current backers - a 25-strong group of investors company can avoid buying back the compulsory fundraising. led by US hedge funds Anchorage Capital and convertible preference shares. Fortis Investment - were approached by EQT In September, the investors dropped the Morningside raises $412m following the company’s A$240 million ($216 option of exercising the put option and started million) debt refinancing in November. negotiations with GMR. Management agreed across three China funds to offer preference shares in GMRI because the Morningside Technologies, an investment Artesian launches company was not in a position to buy back the company set up by Hong Kong’s Chan family - shares, given its debt burden of INR410 billion owners of property developer Hang Lung Group crowdfunding platform and 3.7x gearing.The deals also comes as GMR - has raised $412 million across three China Early-stage venture capital firm Artesian is looking to spin-out the energy business via an technology-focused funds. Venture Partners has launched its equity-based IPO. crowdfunding platform – VentureCrowd – in GGV targets $500m for new Australia with over 200 registered investors and 36 start-ups. VentureCrowd differentiates publicly traded companies and private equity to Sino-US fund itself from other crowfunding platforms such as 30% of total assets. GGV Capital, the US- and China-focused venture Kickstarter and Indiegogo by offering business capital investor, is seeking $500 million for its fifth ownership.