Friday, June 4, 2010

3i eyes new Asia investment from growth fund

SINGAPORE: 3i Group plans to invest almost a third of of its '1.2 billion (US$1.5 billion) growth capital fund in Asia and North America, targeting stakes in Asian companies in consumer, oil & gas and healthcare.

Mark Thornton, a partner and Southeast Asia head of the UK-listed private equity firm, told Reuters on Wednesday, June 2 he saw increasing opportunities in Asia as the financial crisis had made businessmen more inclined to sell part of their companies.

"3i is sensing here that there's a changing attitude. There's more aversion to taking on debt, there is a recognition that actually to sell part of the company and put the money in the bank for a rainy day is a good thing to do," he said.

"The entrepreneurs are also recognising that the world is a lot of more complex and is less predictable."

Looking to capitalise on companies seeking investments from minority investors, 3i closed its growth capital fund in March, raising about '400 million from external investors and contributing some '800 million from its own balance sheet.

Thornton, who said 3i typically considers 100 companies before investing in one, said the timing was good for the growth capital fund, given volatile markets.

The fund requires partners to invest 1% of their own money into each deal, Thornton said, adding investments made in the companies will be for a period of four to five years.

It hopes to make two to three times the money invested in the companies over that period, he said.

3i manages ''9.63 billion (US$14.10 billion) worth of assets globally, including external funds.

Southeast Asia
Thornton, who joined 3i's Asia-Pacific business in 2000 after spending five years with the group in the UK, said the company is looking at three to four interesting opportunities in Southeast Asia and could invest anywhere from $30 million-$100 million each in at least one or two companies this year.

3i is seriously looking at Indonesia, with consumer, consumer finance, healthcare and oil & gas being the key sectors.

Thornton, who is a chartered accountant, said the company is looking to list oil services firm Franklin Offshore, in which it has an about 30% stake, but is not in a rush to do an IPO due to volatile markets.

"We will wait until the timing is right. It could be next year, it could be in three years," he said.

Last year, sources had told Reuters that 3i was looking to sell its stake in Franklin Offshore, but shelved its plan. JPMorgan was advising on the deal.

The need to raise cash had been reduced after it raised ''732 million in a heavily-discounted rights issue.

Thornton said larger institutional investors in the private equity business were likely to outperform smaller players going forward.

"The world is more complex and the more sophisticated investors who have more resources, a bigger network and more sector experience are likely to differentiate themselves from the smaller, less experienced generalist investors."

He said it will prove challenging for the industry as a whole to make positive returns on many of the investments that were made in 2007 and 2008 pre-crisis or at the peak.

"Therefore you will see a shakeout in the industry over the next two to three years. The funds that can make positive returns will differentiate themselves." ' Reuters

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