Indonesia Case Study: Astra International
Astra International today is a $25 billion diversified conglomerate, and the star performer of the Indonesia Stock Exchange.
As Nick Cashmore, CLSA Head of Research and Country Head for Indonesia, says of Astra, “It is the premier investment stock for most investors. It’s the first investment destination of choice.” It is also one of the most conspicuous success stories of post-Asian financial crisis investment into Indonesia – and nearly a big win for private equity.
The largest motor vehicle manufacturer and distributor in Indonesia, Astra also holds a broad portfolio of businesses from palm oil to heavy engineering that Cashmore describes as “broadly exposed to the growing economy, and especially in businesses that are growing well.” However, the company suffered post the Asian financial crisis, and by 1999 was seeking agreements to restructure its debt.
In 2000, a consortium led by Jardine Cycle & Carriage, the Singaporean entity later incorporated into Jardine Matheson Holdings, acquired around a 40% stake in Astra from the Indonesian government – for $506 million in cash. Another bidding consortium led by Newbridge Capital, the TPG arm that subsequently became TPG Capital’s Asian operation, made its own bid for the asset, but failed to carry this through – apparently after Astra’s then management prevented proper due diligence on the company’s accounts. But Jardine, which had been making approaches to Astra since 1991, carried the deal through, advised by JPMorgan.
By 2005, Jardine Cycle & Carriage had raised its stake to 49.92%, in the process becoming one of Singapore’s 50 biggest companies. And Astra has continued its rise off Indonesia’s resurgence from the depths of 1999-2000, settling its outstanding debt ahead of schedule in 2004, while picking up 31.5% of PT Bank Permata the same year, and celebrating its 50th anniversary in 2007, having grown its market cap by some 25x in a decade to a multi-billion dollar company. As local market participants remark, though, the Asian financial crisis was a once-in-a-lifetime event, and new PE investors, even if they may find good opportunities, are unlikely to see such a good deal again.
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