Alternative Investment Forum, Monaco 2005

1. The Emergence of Private Equity in Asia
Presentation by Tuck Seng Low
STAC Partners LLP
THE ALTERNATIVE INVESTMENT FORUM
Monaco
24 February 2005
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2. Introduction
STAC Partners is focused on alternative investments, primarily:
private equity/venture capital
hedge funds
real estate
We specialise in intermediating capital flows between Asia and Europe
In Europe and Asia, we have acted for:
corporates
financial institutions
private equity firms
substantial family-controlled businesses
buy-out/buy-in teams
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3. Background
“The Private Equity investment proposition for Asia today is compelling”
• Growth and scale
• Human resources and attitude
• Major international interest
• Reform
• Financing
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4. Selected Asian Economies
Reserves Per Capita Cellular Cellular GDP Growth
2003 Population GDP (PPP) & Gold GDP Phones Penetration 2003-2
(m) US$ bn US$bn US$ (m)
Australia 20 571 33 29,000 14.3 72.0% 3.0%
China 1,299 6,449 413 5,000 269.0 20.7% 9.1%
India 1,065 3,033 102 2,900 26.2 2.5% 8.3%
Japan 127 3,582 665 28,200 86.7 68.1% 2.7%
Singapore 4 109 96 23,700 3.5 80.9% 1.1%
Source: CIA
GDP Grow th Rate vs Cell phones per person (2003)
10.0%
China
9.0%
India
8.0%
7.0%
GDP Growth (%)
6.0%
5.0%
4.0%
Aust ralia
3.0%
Japan
2.0%
Singapore
1.0%
0.0%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0%
Cell phones per person
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5. Growth of the Market
ASIAN PRIVATE EQUITY POOL 1994 - 2003
US$ bn
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 cagr
Australia 1.7 2.3 2.8 2.7 3.1 3.6 4.2 4.7 5.0 6.0 29%
China 5.2 6.0 6.4 6.9 nm
HK 6.0 8.0 8.7 10.7 15.4 22.3 24.1 26.0 26.6 27.1 39%
India 0.2 0.3 0.8 1.0 1.1 1.8 2.9 2.4 2.6 3.1 132%
Japan 17.8 14.9 11.3 7.7 12.5 21.7 21.1 21.5 22.3 25.4 5%
Korea 1.9 2.6 3.2 1.9 3.0 5.0 6.0 6.3 6.6 9.1 42%
Singapore 1.8 3.2 4.0 4.5 5.3 7.8 9.3 9.8 10.2 10.7 54%
Taiwan 0.6 0.7 1.3 1.9 3.6 4.4 5.9 6.3 6.4 6.5 117%
Others 1.0 1.5 1.6 1.8 1.9 2.4 2.5 2.5 3.1 2.8 21%
31.0 33.4 33.8 32.1 45.8 69.1 81.2 85.6 89.2 97.6 24%
Source: AVCJ 2005
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6. Geographic Markets
No. of Avg under
H1 2004 % Total Funds Mgmt
US$ bn US$m
Australia 6.8 7% 180 38 Others Australia
Taiw an
China
China 7.3 7% 237 31
HK 27.1 27% 177 153 Singapore
India 3.2 3% 82 40
Japan 27.3 27% 258 106 Korea
HK
Korea 9.0 9% 162 56
Singapore 10.9 11% 118 92
Taiwan 6.6 7% 172 38
Japan India
Others 2.9 3% 123 23
101.1 1,509 67
Source: AVCJ 2005
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7. Types of Funds
Regional funds: Affinity Equity, Barings, Excelsior Capital, GEMS, Natexis, Newbridge,
Softbank
Country: Carlyle Japan Buy-out, Citicorp-Nikko, JAFCO, MKS, NIF-PAMA, Unison Capital,
Globis
Bank-sponsored: CLSA Private Equity, CVC Asia Pacific , Goldman Sachs, HSBC
Corporate: Intel Capital, Investor, Itochu, Mitsubishi, Mitsui, Nokia Ventures, Sumitomo
Distressed/Turnaround: Wilbur Ross Jnr (Japan), Cerberus (N Asia), Ripplewood
Specialised: Asia Mezzanine Capital Investors, Darby (acq. Pru Asia Infrastucture
Investments), WhiteRock Partners
Fund of Funds: HarbourVest, Pantheon
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8. Investments
2004 H1 SELECTED INVESTMENTS
Company Country Industry Investment Stake Investors
US$ bn
DDI Pocket Japan Telecoms 1.93 77% Carlyle, Kyocera
Hynix Non-memory chips Korea Semiconductors 0.80 100% CVC Asia Pacific
Mitsubishi Motors Japan Automotive 0.62 33% Phoenix Capital
Millennium Retailing Japan Retailing 0.46 50% Nomura Principal Finance
Shui On Land China Financial services 0.40 nk Citigroup, Ergo, Jebsen, StanChart, Value Partners
Sanda Kan Industrial HK Manufacturing 0.15 100% Search Asian Mezzanine, JP Morgan Partners
Shenzhen Dev Bank China Financial services 0.15 18% Newbridge Capital
Moser Baer India India Computer 0.15 12% Warburg Pincus
C&M Communications Korea Telecoms 0.12 30% Goldman Sachs
Baekyang Tunnel Korea Infrastructure 0.11 99% Macquarie
ASIMCO China Logistics 0.10 nk Key Principal Partners
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9. Exits
2004 H1 SELECTED EXITS
Company Country Industry Amt Raised Stake Investors Exit
US$ bn
Japan Telecom Japan Telecoms 3.07 100% Goldman Sachs, Newbridge, PPM, Ripplewood Trade
KorAm Bank Korea Financial services 2.71 100% Corsair, Carlyle, StanChart, CDP, PPM, PAMA Trade
Shinsei Bank Japan Financial services 2.20 35% Ripplewood, ABN Amro, Santander, RIT IPO
Ping An Insurance China Insurance 1.84 22% Morgan Stanley, Goldman Sachs IPO
SMIC Japan Semiconductor 1.78 20% Temasek,Vertex, Walden, H&Q, Goldman Sachs IPO
Pacific Brands Australia Retailing 0.96 100% Catalyst, CVC, PPM IPO
Just Jeans Australia Retailing 0.37 nk Catalyst IPO
China Mengniu Dairy China Food 0.18 28% Morgan Stanley, CDH, CGU-CDC IPO
Shanda Interactive China Online games 0.15 nk SOFTBANK IPO
Sanda Kan Industrial HK Manufacturing 0.15 100% ZS Fund Secondary
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10. Private Equity: Japan vs China
COUNTRY FEATURES FINANCING INDUSTRIES LOCAL GPs EXITS
Japan - Increasingly - No shortage of - Very broad - Tight market - Local stockmarkets
active buyout private equity - Trade
market - Leveraged
- Established financing readily
foreign presence available
China - Early stage of - Selected interest - Telecoms - Very limited - Local/regional
development - Computers markets
- Opaque - Semiconductors - NASDAQ
- Consumer
electronics
- Basic industrial
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11. Key Issues
• Dichotomy
– Risk profile
• Deal flow
• Opaque
– Business practices, disclosure
• Governance
• Measurement
• Relative inexperience of local GPs
• Distance
– Coverage challenges
• Exit mechanisms
• Currency
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12. New Fund-raisings
Size Scope
Recently closed (Qtr 4 2004)
Affinity Asia Pacific Fund II US$700 m Regional
HSBC Private Equity (Asia) Fund III US$700 m Regional
Partners Group Asia Pacific US$50 m Regional fund of funds. Buy-out focus
Unison Capital Partners II ¥75 bn Japan only. Late stage/buy-outs
Ongoing
Excelsior Capital >US$150m Regional
NIF-PAMA Target ¥50 bn Japan only. Mid-market buy-outs
NIF Ventures Approx. ¥20 bn Japan only. Technology
WhiteRock Partners Target US$100 m Global. Late-stage medical technology
Planned
Carlyle nk Pan-Asian
JP Morgan Partners >US$1 bn Pan-Asian
Source: STAC Partners
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13. Approaches to PE Investment in Asia
• Fund of Funds:
– Regional: Eg. Pantheon, Partners Group, HarbourVest
– Customised vehicles
• Single Funds:
– Geographic
– Sector
– Stage
• Direct:
– Numerous options/opportunities
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14. Opportunities
• Japan
– Restructuring and M&A will continue to drive deal flow
• China-related plays
– Selected sectors
• Other emerging markets
– Singapore and Malaysia
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15. Alternative Investment Deals
Completed Transactions: 2004
• Acquisition of software company in Japan by Swiss technology group
• Strategic investment by Japanese industrial group in above group
• Financing of buy-out of a European PE portfolio from a large bank
Ongoing
• Japanese mid-market buy-out fund
• Singapore headquartered global Medtech fund
• Scandinavian technology fund
• Structured risk transfer JV
• Fund of hedge funds
Pipeline
• Proprietary opportunities
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16. Contact Information
STAC Partners LLP
Trafalgar House
11 Waterloo Place
London SW1Y 4AU
Tel: +44 (0)20 7863 8873
Fax: +44 (0)20 7839 5162
www.stacpartners.com
Partners
Tuck Seng Low Oliver Parr
tsl@stacpartners.com op@stacpartners.com
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17. Disclaimer
This presentation provides summarised, general information on the private equity market
in Asia. It is not an offer of interests in any of the private equity funds mentioned in the
presentation or any future vehicle(s) related to STAC Partners LLP. STAC Partners LLP
does not accept responsibility for the authenticity, origin, accuracy, validity or
completeness of forecasts, opinions and comments in this presentation.
STAC Partners LLP is a limited liability partnership registered in England & Wales and is
authorised and regulated by the Financial Services Authority, UK.
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