Deals – April 2009

PE firms vie for Korean brewer * Navis-owned Nirula's draws buyers * Venture firms invest $40 million in Chinese media group * Intel backs three UAE companies * Biotech IPO gives STIC 2x exit * INR500m infusion for Indian engineering * Investcorp writes down $95m * Babson makes Asian foray * KKR portfolio company valued at zero * ICICI's Subhiksha under investigation

PE firms vie for Korean brewer
Affinity Equity Partners, MBP Partners, Bain Capital, The Carlyle Group and Kohlberg Kravis Roberts have reportedly submitted bids for Oriental Brewery, Korea’s second largest brewer, in an auction that has also drawn bids from strategic buyers.

A source familiar with the deal told PEI Asia that the sale of the brewery is likely to fetch more than $2 billion. JPMorgan and Deutsche Bank are managing the sale of the business. Ten first round bids have been submitted and these include offers from private equity firms that have established interests in Korea and a good focus on the consumer sector, the source said.

Oriental Brewery is controlled by Anheuser-Busch InBev, which wants to sell its non-core assets as it seeks to repay a $7 billion bridge loan linked to InBev’s $52 billion buyout of US-based Anheuser Busch last year, Reuters reported.

Navis-owned Nirula’s draws buyers
Malaysia-based mid-market buyout firm Navis Capital is considering the sale of Nirula’s, an Indian fast food chain it acquired in June 2006.

The Economic Times reported that Navis has appointed NM Rothschild to advise on a potential sale.

The firm has been approached by potential buyers, Nick Bloy, a co-managing partner at Navis, confirmed with PEI Asia. He said that the firm is fielding enquiries pertaining to a potential sale of Nirula’s and that it has started responding to suitors. The business will be sold if the firm receives a suitable offer, he said, adding that Navis is not close to a sale just yet.

Indian media reports suggest that Navis is seeking about INR 300 crores ($58 million) from the sale. It is believed to have acquired the chain for about $20 million. The investment was made out of Navis Asia Fund IV, a $315 million vehicle.

Venture firms invest $40 million in Chinese media group
Shanghai-based Gobi Partners and US-based Oak Investment Partners have invested $30 million in Digital Media Group, a Chinese operator of digital advertising platforms, in a third funding round.

Digital Media Group is a Shanghai-headquartered company providing digital media and advertising solutions for subway systems in China. Its network consists of bus shelters in Shanghai and 30 subway lines in cities including Beijing, Chengdu, Guangzhou, Hong Kong, Nanjing, Shanghai, Shenzhen and Tianjin.

Oak Investment Partners led the company’s $32.5 million second funding round alongside venture firms Gobi Partners, Sierra Ventures and NIF SMBC Ventures in late 2006. The company received its first round of funding worth $8 million in 2005 from Gobi Partners, Japanese mobile operator NTT DoCoMo and Japanese advertising agency Dentsu.

Intel backs three UAE companies
Semiconductor giant Intel’s venture arm has made investments in Conservus International, Pulse Technologies, and Vertex Animation Studio, all technology companies based in the UAE. The investments were made out of the Intel Capital Middle East and Turkey Fund, a $50 million vehicle that makes investments in companies developing hardware, software and local content.

Conversus International is a media marketing company responsible for the conceptualisation, design and development of a digital advertising medium known as MyConservus Portal. Pulse Technologies is a manufacturer of automation systems catering to property and hotel developers across the Middle East, Southeast Asia and Europe. Vetex provides animation services, virtual reality applications and 3D multiplatform games.

The funding will enable the three companies to pursue regional growth and development plans and will help enhance their product offerings. The amounts invested were not disclosed.

Intel Capital also invested an undisclosed sum in Enjoyor Technology Group, an intelligence-focused technology company based in China’s Zhejiang province. The China investment was made from the $500 million Intel Capital China Technology Fund II.

Biotech IPO gives STIC 2x exit
STIC Investments, a Seoul-based private equity and secondaries fund manager, has sold its stake in Medy-Tox, a Korean biotech company, which was listed on the Korean Stock Exchange in January. STIC sold its entire stake in the company, generating a net IRR of 33.2 percent for investors and returning a 2x multiple on its initial investment.

The firm acquired a stake of about 10 percent in the last quarter of 2006, Trevor Chan, a director of the firm, told PEI Asia. He declined to comment on the amount invested.

STIC Investment has offices in Seoul, Busan, Taipei, Hong Kong, Shanghai, Silicon Valley and Ho Chi Minh City. The firm manages assets of more than $1.2 billion and has invested in more than 282 companies since its formation in 1999.

INR500m infusion for Indian engineering
Mumbai-based private equity firm Nine Rivers Capital has made its maiden investment from its debut fund. The firm has acquired a significant minority stake in Pranav Construction Systems, for INR 500 million ($10 million). Pranav is a turnkey solution provider in the engineering of formworks – temporary structures designed to hold and support wet concrete until it cures.

The additional capital will be used by the Mumbai-based company to set up a manufacturing facility that will expand its capacity by almost 400 percent. It will also fund the company’s future growth.

The firm’s first fund is a $125 million vehicle that saw a first close on $45 million in September 2008. The fund invests in engineering and manufacturing businesses that are a part of the infrastructure supply chain, Sandeep Daga, Nine Rivers Capital’s director and co-founder told PEI Asia.

Investcorp writes down $95m
Investcorp, an investment firm listed on the Bahrain and London stock exchanges, suffered unrealised losses of $95 million on its private equity portfolio for the six months ended December 2008, a spokesman told PEI Asia. In the same period in 2007, the value of the firm’s private equity portfolio increased by about $100 million.

The firm reported an overall loss for the first time in its history, making a $511 million net loss during the second half of last year. The firm also saw its net asset income decrease by $526 million in the same period.

In January, Standard & Poor’s Rating Services lowered the firm’s credit ratings from ‘BBB/A-2’ to ‘BB+/B’. The downgrade reflected declining valuations of the firm’s investments due to the financial crisis and the firm’s high leverage and narrow business diversification, S&P said.

Investcorp’s private equity portfolio currently consists of 23 companies, primarily Europe and the US. The firm managed assets of $10.3 billion at the end of December, down from $12.8 billion at June 2008.

Babson makes Asian foray
US-based investment firm Babson Capital Management has made its first Asian investment. The firm invested $15 million in the form of senior subordinated notes with warrants in Chinese steel casting business Yingliu International.

Other investors in Yingliu include China-focused firms CDH Investments and China Everbright Investment Management, as well as Hong Kong-based Asia Mezzanine Capital.

“This investment represents an important asset class for Babson Capital and we look forward to pursuing similar opportunities in the Asian market,” said Mike Hermsen, a managing director at Babson Capital.

Babson Capital is part of international financial services firm MassMutual Financial Group and manages approximately $108 billion as of December 2008. The firm has offices in London, Tokyo and Australia.

KKR portfolio company valued at zero
Kohlberg Kravis Roberts portfolio company Seven Media Group (SMG), an Australian media house with interests in television, magazines and online businesses, has been valued at zero as of December 2008 by Seven Network, the other major stakeholder in the company. Seven Network wrote down the value of its 47 percent stake from A$794 million ($502 million) to zero.

SMG is a joint venture between KKR and Seven Network. It was formed in 2006 with KKR investing approximately $735 million for a 50 percent stake. The joint venture was intended to provide the two owners with a vehicle to pursue media opportunities in Australia and New Zealand.

The transaction was valued at A$4 billion and included debt financing from Morgan Stanley, Mizuho, Goldman Sachs and Citigroup, of which approximately $2.5 billion was to be drawn down once the deal had closed.

Seven said in its half-yearly results that the writedown in the value of its investment in SMG to zero “reflects the continuing deterioration of the advertising market”. Kerry Stokes, chairman of Seven Network, said there was no indication yet that SMG would breach covenants on its debt of approximately $2.5 billion, The Australian reported.

ICICI’s Subhiksha under investigation
India’s ICICI Venture has called for an enquiry into the management of Subhiksha Trading Services, an Indian retail company, after liquidity issues surfaced. The firm has written to India’s Registrar of Companies calling for an investigation of the operational, managerial and financial affairs of Subhiksha, in which it owns a 23 percent stake.

ICICI has also withdrawn Renuka Ramnath, its managing director and chief executive, and Rajeev Bakshi, its joint managing director, from the company’s board.

In October 2008, KPMG said that it was unable to conduct an independent review of the company as its management was not cooperating.

ICICI said it granted Subhiksha a loan of INR500 million ($10 million) to meet short-term liquidity issues in September 2008. However, Subhiksha has debts of almost INR8 billion, according to an industry source.

ICICI Venture is in discussions with lenders and investors and is exploring options for the revival of its portfolio company’s business. It declined to comment on whether it will sell its stake in the company. The firm originally acquired a 38 percent stake in the company for INR930 million between 2000 and 2004. It subsequently sold a 15 percent stake in two tranches.