UPDATE 3-Duty Free Shopping founder sells Squadron to FLAG Capital -sources

Tue Oct 23, 2012 3:35am EDT

* FLAG will have $6 bln in assets after acquisition

* Squadron team to stay in place after acquisition-source

* FLAG's Asia principal to have snr role after merger-source

* Miller put Squadron up for sale after a review - sources

* Acquisition gives U.S. based FLAG a presence in Asia

By Stephen Aldred

HONG KONG, Oct 23 (Reuters) - U.S. private equity investor FLAG Capital Management said it has agreed to buy Squadron Capital Advisors, an Asian private investment firm with $1.5 billion in assets controlled by the founder of Duty Free Shopping outlets Robert W. Miller.

The deal, set to be the first acquisition of a fund of funds in Asia's private equity industry, is expected to involve Squadron's team of around 23 people, including chief executive David Pierce, staying on board, a source previously told Reuters.

"Squadron has one of the most experienced private equity fund of funds teams in Asia, and we are excited to be joining such a terrific organisation," said Pierce, who will become a partner after Squadron is integrated into FLAG.

Fund of funds pool capital to invest in selected private equity and hedge funds on behalf of other investors. The value of the deal was not disclosed, but the acquisition will give FLAG, which was founded in 1994, $6 billion in assets.

Miller put Squadron Capital, founded in 2006 and one of the region's best known fund of funds, up for sale after of a strategic review, other sources said.

FLAG Capital's Asia-based principal Tina Wei is expected to have a senior role after the acquisition is complete, one of those sources said.

Wei declined to comment. The sources could not be named as details of the merger were private.

The acquisition gives the U.S. firm, established in 1994, a presence in Asia through an established platform.

Squadron is a unit of Miller's Search Investment Group, which he founded in the early 1970s, according to information on the Search website. Squadron Capital manages the group's private equity and direct investment portfolios.

Squadron also manages funds and investment programmes for investors across the Asia region, and in 2011 established a $150 million programme with Finnish government pensions institution Keva to invest in private equity funds in China, India and Southeast Asia.

Duty Free Shopping, which Miller co-founded, is now co-owned by luxury retailer and investor LVMH Moet Hennessy Louis Vuitton SA of France.

The Search Investment Group is also a shareholder in Ortelius Capital Partners, an investment firm with offices in New York and London that was founded in 2002 by Miller's son-in-law, HRH Prince Pavlos of Greece.

The acquisition of Squadron from Search is expected to close on or before December 31, 2012.

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