TPG-backed Northstar plans $1 billion SE Asia fund as global rivals circle - sources

Reuters

By Stephen Aldred

HONG KONG (Reuters) - TPG Capital-backed (TPG.UL) private equity firm Northstar Group is seeking to raise around $1 billion (619 million pounds) in a new fund to invest in Southeast Asia's fast-growing economies, people familiar with the matter told Reuters.

Singapore-based Northstar, co-founded by former Goldman Sachs (NYS:GS) banker Patrick Walujo and Glenn Sugita, is one of Southeast Asia's home-grown buyout firms and is facing rising competition from global rivals like KKR & Co (NYS:KKR) and Blackstone Group (NYS:BX). Both KKR and Blackstone have moved teams into the region in the last year.

Founded 10 years ago in Indonesia, the firm is still finalising details of the new fund, its fourth, after its recent annual general meeting in Jakarta. The move shows the region's appeal continues to override lingering concerns among some investors about bubbling valuations in a volatile market.

Northstar is betting its track record in the region will help it raise its biggest fund so far, more than the $820 million it raised last time, which was largely invested in Indonesia.

While the majority of the new funds raised will be invested in Indonesia, according to the people familiar with the matter, Northstar hopes to invest more in markets outside the country.

Southeast Asia, home to about 600 million people, is seeing a rise in its consumer class as its economies advance. Recent successful exits by CVC Capital and TPG from their Southeast Asia investments are increasing private equity activity in the region.

TPG owns around 20 percent of Northstar Group, while Northstar owns around a 5 percent stake in TPG.

Northstar declined to comment on its fund-raising plans. The people familiar with the matter declined to be identified as the fund-raising plans were private.

PUBLIC VS PRIVATE

CVC cashed in part of its 60 percent stake in PT Matahari Department Store (LPPF.JK) this year through a $1.3 billion share sale, while TPG agreed to sell a 40 percent stake in Bank Tabungan Pensiunan Nasional (BTPN) (BTPN.JK).

CVC is on track to make a return of between 7 and 8 times its initial investment, while TPG would make more than 10 times its initial investment if it sold the rest of its stock in BTPN at the same valuation.

Those exits were a reminder to global private equity firms of the kind of money that can be made from investing in the region.

But weak corporate governance standards as well as volatile markets make some foreign investors reluctant to put their money in Southeast Asia. And private equity firms in particular are taking note that company valuations in certain countries - Indonesia a case in point - are expensive. With the exception of a few transactions, private equity-backed deals in Southeast Asia have remained relatively modest, despite rising interest from foreign buyers.

"A lot of entrepreneurs are still holding on to the expectation of valuations from when the market was frothy, and private equity market valuation doesn't react as quickly as public equity," said Meng Ann Lim, Partner and Head, China & Southeast Asia at private equity firm Actis, speaking at a recent conference.

Northstar has managed, however, to put a large amount of money - relative to the region - to work in a short period of time.

Along with TPG, it invested in BTPN, and it has also put money into Indonesian financial services companies PT Delta Dunia Makmur Tbk and PT Trimegah Securities Tbk.

Northstar was also part of the $103 million management-led buyout of Singapore's biggest property broker, ERA Singapore Pte Ltd.

(Reporting by Stephen Aldred; Additional reporting by Eveline Danubrata and Saeed Azhar in SINGAPORE and Janeman Latul in JAKARTA; Editing by Denny Thomas and Kenneth Maxwell)

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