Guido Gamucci

Guido Gamucci is chairman of Permira's operation in Asia. Previously responsible for the firm's Milan office, he relocated to Japan in 2005 and is poised to move to Hong Kong when the UK buyout group opens its second office in the region next year. In October, Permira made headlines for doing not just one, but two large deals in Asia. First came an $838 million investment for a 20 percent stake in Galaxy Entertainment, a Macau-based casino operator; then followed a $2.2 billion secondary deal to acquire Arysta Lifescience, a Japanese agrochemical company, from Olympus Capital. For Permira, it was the first investment in Japan since its arrival two years ago.

What took you so long to ink the first deal in Japan?
When we opened our Tokyo office in 2005, we had a three- to five-year programme knowing that the Japanese market is difficult as the LBO model is not as developed. We were not under pressure to do any deals, even though the market likes to measure success by the speed of capital deployment. We were disciplined. We looked at other deals but chose to stay away from some auctions including those for Sanyo and JVC, which we looked at for over a year. The Arysta opportunity arose after one year, when the owner, Olympus Capital, was looking at either a buyout or a partnership with a strategic investor to bring the company to the next phase of its development. Arysta is in an industry prone to consolidation and there are potential deals in the pipeline that are larger than Olympus could support in the company's expansion.

In terms of financing the deal, was availability of leverage an issue at all, especially in the current climate?
For Arysta, the relationships we have built with the Japanese banks afforded us a debt package that wouldn't have been possible elsewhere and that also meant we could propose the most credible offer. Syndication desks of various international banks had a lot to say because of tightening liquidity in New York and Europe but our debt package was significantly drawing on liquidity in Japan. There was participation from international banks – Lehman and JP Morgan – as well as Japanese lenders such as Aozora, Mizuho and Shinsei. It was very encouraging that Japanese banks were committing time and resources to financing the transaction.

We were not under pressure to do any deals, even though the market likes to measure success by the speed of capital deployment.

Does the Arysta buyout represent the type and size of deals Permira is looking for in Asia?
We are interested in control buyouts or influential minority situations which can be big ticket items, and that is why our priority, for now, lies in North Asia – across Japan, Korea and Greater China. At $11 billion, our present fund enables us to focus on transactions that require equity cheques ideally north of $500 million. The Arysta transaction comprises $1 billion in equity and $1.2 billion in debt. Despite the recent credit environment, we have received more than 100 percent in commitments to the debt facility. This is not a heavily geared transaction so as to avoid cash flow drain at Arysta. We are very satisfied with the acquisition. It is a dividend of our strategy and happening as the Western world put the brakes on larger LBOs.

Galaxy is quite different from Arysta; how did that come about?
Galaxy Entertainment was mostly a sector play. Martin Clarke, the head of our consumer sector team, is a gaming specialist who has had long experience in the sector, a factor that attracted the attention of the advisors to the Lui family when they were looking for a partner for Galaxy after an earlier partnership with an operator in Vegas failed to work out. They were courted subsequently by major US private equity firms that were perceived to be ‘too financial’ in their investment approach. Permira was recommended to them and we proceeded to reaching an agreement for a 20 percent stake. The $838 million transaction is 100 percent equity – we didn't use any leverage.

Is Galaxy a sign of things to come for you in the Greater China region? Are there any plans to raise an Asia-dedicated fund?
We plan to set up an office in Hong Kong by the second quarter of next year and to build a local team on the ground. I will also be moving over from Tokyo where we will have a team of eight professionals by the end of this year.

There are no plans to raise an Asian fund. We will continue to invest in Asia from our global fund. The idea of investing from one single fund is that every deal regardless of its origins has its own merit, and is measured on a broader global standard. Galaxy is a deal that confirms our hypothesis about making ‘significant’ minority investments work. It marked, I believe, a turning point and showed that big ticket items for such investments in Asia are available. We have been exploring opportunities across Greater China for a while before Galaxy, and have seen a number of deals in the $100 million range.