European CVC Targets Asia Pacific Market –

CVC Capital Partners in mid-February announced the launch of its $750 million Asia Pacific investment program, just over a year after the group first made public its intention to establish a dedicated fund for the region. The fund is by far the largest Asia-focused vehicle raised by an independent European private equity house.

As one of the pre-eminent players in the European buyout market, CVC was able to tap its extensive investor base for the bulk of the $500 million “open-market” third party capital raised for the fund. The balance was committed by Citigroup, which has formed an alliance with CVC to further its investment program in the Asia Pacific region. Since its buyout in 1993, CVC Capital Partners has acted as Citigroup’s European private equity investment adviser.

Drawing on Citigroup History

CVC Asia Pacific, a wholly owned Citigroup subsidiary, will advise the fund, which will draw both on CVC’s buyout expertise and Citigroup’s long history of merchant banking in Asia.

The CVC Capital Partners Asia Fund will acquire significant or controlling stakes in businesses, and work closely with management. The firm is targeting companies valued at $25 million or more that operate in high growth sectors, including manufacturing, services, media, telecoms and distribution. The new fund’s primary target markets are China, Hong Kong, Korea, Singapore, Taiwan, Thailand, Australia and Japan, but the fund can invest on an opportunistic basis across the entire Asia Pacific Region.

Although buyouts have been a relative rarity to date in Asia, pressure on local industry to restructure in the wake of severe economic upheavals in the late 1990s has created opportunities for private equity buyers in a number of the Asian markets. In parallel, said Vincent Fan, CVC Asia Pacific’s chief executive, “Private equity is becoming more acceptable to local owner managers.”

These phenomena have coincided with a strong trend towards globalization of the private equity asset class. Executive vice president Stephen Long, who heads Citibank Global Corporate Bank’s Asia-Pacific Group, said “This fund provides the right opportunity at the right time with the right management team … There is a huge range of opportunities for private equity to help develop companies both within the region and internationally.”

The new fund offers CVC the potential to target global consolidation plays; a spokesperson for the buyout house said, “where appropriate, opportunities will be sought to combine high-growth Asian businesses with more mature European groups.”

The fund will be managed through offices in Hong Kong, Thailand, Taiwan, Korea and Australia by a 20-strong team. As well as Fan, the senior management team includes Percy King, the former head of Citicorp Capital Asia’s Taiwan operation; Maarten Ruijs, a veteran of CVC Capital Partners’ Netherlands team; Andrew Cummins, who takes responsibility for the fund’s activities in Australasia; and European investment director Adrian MacKenzie, who will move to Asia.

Foundation Poured

CVC Capital Partners Asia Fund has already laid the foundations of its portfolio with the buyouts of Li & Fung Distribution, a leading distribution business based in Hong Kong, and Korea’s Mando Climate Control Corp. A second deal in Korea, involving a dairy foods business, is currently pending completion and the firm claims to have a strong pipeline of deals.

CVC Capital Partners looks certain to hit the fund-raising trail again during the course of this year, thanks to the rate that it has deployed the $3.1 billion regional European fund, which closed in mid-1998, in deals including Kappa Packaging, William Hill, BSN and, most recently, Invensys Sealing Systems. The group’s current portfolio, valued at e17 billion at cost, has a combined turnover of e24 billion.