Carlyle, Suntory lead race for stake in GarudaFood: sources

JAKARTA/SINGAPORE Tue May 31, 2011 1:41am EDT

JAKARTA/SINGAPORE (Reuters) - Private equity firm Carlyle Group CYL.UL and Japanese brewer Suntory SUNTH.UL are leading a race to buy a 30 percent stake in Indonesian consumer firm GarudaFood worth over $200 million, three sources with knowledge of the deal said on Tuesday.

If Carlyle wins the bid it would be the first direct investment made by the buyout firm in Southeast Asia's biggest economy, where rivals TPG Capital TPG.UL and CVC CVC.UL have already snapped up finance, resource and consumer plays.

Deals by private equity firms in Indonesia have picked up in the past year as intense competition in hot markets such as China and India encourages global buyout firms to push into fast-growing emerging markets in Southeast Asia.

Indonesia's Tudung Group is offering its stake in GarudaFood, which sells instant food, peanuts, and other snacks globally.

"The deal is almost complete and we hope it could be done by mid-June, the only problem is the valuation," said one of the sources, adding that after the deal GarudaFood expected to launch an initial public offering within one or two years to tap public funds.

Tudung Group, an investment holding firm controlled by the family of founder Darmo Putro, and Carlyle were not available to comment. Suntory declined to comment. The Tudung Group told Reuters in December a stake sale was being planned and that it had hired Barclays Capital (BARC.L) to run the sale.

The sale attracted interest from several foreign investors, including private equity firms 3i Group Plc (III.L) and Unitas Capital, but only Carlyle and Suntory made it to the final bidding, said the sources, who declined to be identified because the deal was not public.

Indonesia's consumer sector is attracting a lot of foreign investors as spending rises from an emerging middle class. Average salaries have risen by more than a quarter in the last three years, and the economy is seen posting growth over 6 percent again in 2011.

Carlyle is also eyeing a stake in the hypermarket unit of Matahari Putra Prima (MPPA.JK), Indonesia's biggest retailer by market value, which has also been in talks with Wal-Mart Stores Inc (WMT.N) to become a partner.

POTENTIAL

The GarudaFood deal is the latest of a string of private equity acquisitions, coming after CVC paid a total of over $1 billion for a cable TV firm and a department store chain in the sprawling archipelago.

"We see Indonesia as being a country like others in Asia and in the emerging market universe as one with a lot of potential," said Peter Elston, strategist at Aberdeen Asset Management in Singapore, which owns shares in consumer giant Unilever Indonesia (UNVR.JK).

"You look at wealth levels per capita and they are still pretty low...That gives you a huge amount of scope for wealth creation," he said, adding quality assets would trade at a bigger premium than elsewhere, reflecting long-term potential.

Indonesia's stock index .JKSE, which is up over 3 percent this year following a 46 percent surge in 2010, trades at an average forward PE of 18.4 times, versus 13.9 times for Thailand and Malaysia, according to data from Thomson Reuters Starmine.

Concerns over the valuation of Matahari's hypermarkets have led to a drawn out bidding process for those assets, sources say.

Lippo Group, an Indonesian conglomerate that controls Matahari via PT Multipolar (MLPL.JK), in January scrapped plans to sell its Hypermart chain because of low offers and instead opted to seek a global partner to expand.

High valuations come despite wider risks from corporate governance, institutional corruption, red tape and inadequate infrastructure. But the deal is yet another signal investors are both willing to take on those risks and pay up.

"Consumer provides promising growth for investors. That area has becomes the favorite for investors," said Norico Gaman, head of research at BNI Securities in Jakarta. "But Indonesian businessmen are rarely selling their controlling ownership and PE firms have to settle for minority stakes."

(Additional Reporting by James Topham in TOKYO; Writing by Neil Chatterjee; Editing by Dhara Ranasinghe)

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