RPT-DEALTALK-CVC, other private equity firms taking hits in Asia
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HONG KONG, Nov 20 (Reuters) - It's been a tough stretch for the Asian portfolio of CVC Capital Partners, a large private equity firm that is taking hits from all parts of the region.
The firm recently failed to dispose of Amtek Engineering, the Singapore metal stamping company it bought last year, and is trying to sell Japanese shoe repair company Minit Asia Pacific in an acquisition climate getting worse by the day .
London-based CVC also has several Asian portfolio companies under pressure and a $4 billion fund to spend in a region where deals are getting smaller and scarcer as global financial turmoil deepens.
But CVC is not alone, with Asia portfolios of other major Western private equity firms being hit as well and tough markets making it hard for them to take profits on earlier investments.
TPG Capital [TPG.UL], which also raised a $4 billion Asian fund, has invested in several finance-related companies that are hurting from the economic slowdown, while shares of Ta Chong Bank (2847.TW), a Taiwan bank backed by the Carlyle Group [CYL.UL], are down aroud 50 percent this year.
Private equity firms rushed to Asia in the last few years to cash in on the region's booming economy, only to find a tougher than expected deal climate. The economic slowdown across Asia and recent market volatility has made the going even worse.
For CVC, the latest disappointment is the failure to sell Amtek, which it bought along with Standard Chartered's (STAN.L) private equity unit for S$552 million last year. Reuters reported in August that CVC and StanChart were preparing to sell the company, which had shown a big increase in cash flows.
The two firms thought they had private equity buyers lined up, but bank financing tightened quickly. Talks with potential suitors have broken off, sources confirmed this week.
The sources are investment banking sources who have worked with CVC, and a person with direct knowledge of CVC's Asia portfolio. None of them wanted to be named in this article.
A CVC spokesman declined to comment.
CVC is also trying to sell Minit Asia Pacific Co. Ltd, which it acquired for 14.5 billion yen in 2006, according to the source with knowledge of the portfolio. While the source said that four bidders have emerged and final offers likely to come next month, pulling off a deal in this environment would be remarkable.
"This is certainly a tough time (for the industry) even in Asia and China," said Liu Erhai, managing director of Legend Capital, the investment arm of Lenovo (0992.HK), China's top PC maker.
His concern was slumping stock markets and the impact that has had on private equity firms trying to cash out of investments by taking companies public through initial offerings.
"From the perspective of private equity investors, the IPO as an exit channel is very important, in particular in Asia and China where we do not have too many other choices to exit." Continued...
