When private equity firms look East, most overlook the Australian marketplace. Simply said, it does not generate the same excitement as other destinations, such as China or India. However, those who have endeavored to invest there would probably say it is worth the 20-hour flight.
And even as other destinations generate more press, Australian private equity groups are ahead of the curve when it comes to actually raising capital. Last year, Australian firms raised $2.9 billion, while such hot spots as India and Hong Kong saw regional PE groups raise a paltry-in-comparison $486 million and $433 million, respectively.
Castle Harlan’s CHAMP fund, the firm’s Australian PE joint-venture with Australian Mezzanine Investments Pty Ltd. (AMIL), has been among the forerunners in Australian private equity. The firm initially entered Australia because it represented a large and untapped market, but most important, according to past reports, was its open rule of law and money markets that were available to investors. Today, new Australian funds continue to emerge, and Australia’s proximity to Asia also gives investors an entryway into that region without some of the risks involved in being a first mover in China.
Castle Harlan’s CHAMP is now looking to follow up its first fund with its second effort, and according to Form D filings submitted with the Securities and Exchange Commission, has already commenced the fundraising for CHAMP II Worldwide, LP. The new fund, which is seeking minimum investments of A$10 million, has already raised A$381.9 million ($293 million). The Bell Atlantic Master Trust and PROCIFIC are two investors identified in the filing. MVision Private Equity Avisors is named as the placement agent.
Published reports have speculated that the fund could reach between A$900 million and A$1 billion in size, which would make the fund the largest of its kind in Australia. (Babcock & Brown and Macquarie Bank each have around A$1 billion of capital available, but are both publicly held entities.)
CHAMP’s first fund has realized a number of notable exits recently, which should make reaching its target only easier. In June, CHAMP I took in a 2.6x return on its investment in Australian Pacific Paper Products (through a sale to Gresham Private Equity) and last July the firm exited Penrice Soda Products, generating a 2.5x return (through a sale to Quadrant Capital and Colonial First State Private Equity).
On the acquisition side, CHAMP acquired petroleum distribution outfit International Energy Services this past January. Other investments include buyouts of Sheridan Australia, a manufacturer of bed and bath linens, and steel consumable maker Bradken, which was taken public last year.
According to the 2005 Private Equity Performance Monitor, the first CHAMP fund has been an upper quartile performer. The fund, as of Dec. 31, 2004, had called on 70.9% of its capital and had so far achieved a 36.7% net IRR.
The CHAMP Website indicates that the firm aims to invest between A$25 million and A$130 million per investment, and it will participate in leveraged and management buyouts, growth capital investments and venture capital deals, which come out of its smaller, CHAMP Ventures fund. That vehicle, meanwhile, targets investments of between A$7.5 million and A$20 million in size. CHAMP also has a 50% partnership in AMWIN Management, a A$42 million fund, partnering with Walden International Investment Group in the Australian government-licensed Innovation Investment Fund (IIF).
The first CHAMP fund, raised in 2000, had closed on A$500 million in total capital, while its smaller, VC-focused vehicle, CHAMP Ventures Investment Trusts #5, last year raised A$165 million.