UPDATE 2-CVC to invest $269 mln in Indonesia's First Media

Tue Mar 22, 2011 5:20am EDT

* CVC to take up to 49 pct stake in First Media unit

* Partnership deal comes after scrapped stake sale

* First Media's stock jumps over 20 pct, vs index down 0.3 pct (Update with quotes, details of deal)

By Janeman Latul

JAKARTA, March 22 (Reuters) - Private equity firm CVC will invest $269 million in the cable TV and internet business of Indonesia's PT First Media , in a deal that reflects investor interest to tap growing consumer spending in Southeast Asia's biggest economy.

The deal marks the second investment by CVC in the Lippo Group, one of Indonesia's biggest conglomerates, and in Indonesia, after its $790 million purchase of a department store chain last year, and bankers expect more M&A deals in the consumer and retail sector.

First Media, controlled by the Lippo Group, said CVC will get a 49 percent stake in PT Link Net, a unit that provides high-speed internet, cable pay TV and data communication services.

"This deal will also attract interest from other parties to co-operate with First Media, or for small investors to invest in its stock," said Winston Sual, a fund manager at Panin Dana Maxima, which runs 5.5 trillion rupiah ($630 million) in funds.

Shares in First Media surged as much as 24 percent after the announcement, and traded 13 percent up at 950 rupiah by 0802 GMT, versus a Jakarta index down 0.3 percent. The stock has been flat this year, versus the index's 5 percent drop.

Foreign investors have sold a net $766 million in Indonesian stocks this year on worries over inflation and as funds move to developed markets and north Asia, though many are still bullish longer term on Indonesia's prospects. The index surged 46 percent last year on $2 billion of net foreign buying.

First Media said in January it had hired Bank of America Merrill Lynch to conduct a strategic review of its business to help the company identify various strategy and growth opportunities.

Lippo had aimed to raise about $400 to $500 million from a sale of their majority stake in First Media and gathered interest from firms including South Korean's SK Telecom Co and KDDI Corp , but the group saw bids as too low.

"This will allow us to invest more heavily in much needed telecommunication infrastructure," said Peter Gontha, First Media's chairman, on the deal with CVC.

Inadequate infrastructure in the archipelago is seen as a hurdle to growth and an investment opportunity. A growing middle class, with salaries having risen over a quarter in the last three years, is expected to drive demand for consumer products.

DRY POWDER

Intense competition for deals in hot markets like China and India means global buyout shops like CVC, the Carlyle Group , TPG and Blackstone are increasingly pushing into fast-growing markets like Indonesia, Malaysia, the Philippines and Vietnam, as they hunt for investments.

Asia now accounts for almost one-fifth of overall global private equity volume, and Thomson Reuters data shows $73 billion in dry powder in the region - money that was raised for private equity investment but has not yet been put to work.

CVC has a total of 13.5 billion euros in investment capital, and is actively investing in Asia from its CVC Asia III fund, according to its website.

CVC usually seeks a controlling stake in companies, to ensure the management control needed to turn assets around. But in Asia minority stakes are the norm, and in Indonesia tycoons are normally only willing to sell stakes of around 20 percent.

"A global private equity firm's entrance into a company means that it will improve the firm's transparency as it will put its people in to make sure the firm runs well," said Panin Dana's Sual. ($1 = 8723.5 Rupiah) (Additional reporting by Fathiya Dahrul in JAKARTA, Viparat Jantraprap in BANGKOK and Stephen Aldred in HONG KONG; Writing by Neil Chatterjee; Editing by Muralikumar Anantharaman)

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