Affinity completes debut Indonesia deal
Affinity Equity Partners has completed its first Indonesian investment, securing a significant minority stake in local auto services group Mitra Pinasthika Mustika (MPM) for about $100 million.
According to a source familiar with the transaction, Affinity initiated discussions with MPM in 2009, not long after it opened an office in Jakarta. The dialogue continued sporadically, "with a lot of back and forth," before an agreement was struck. During this period the private equity firm helped MPM open up two new business lines.
The company started in 1987 as the exclusive franchisee for Honda motorcycles in east Java. It retains the Honda franchise and claims to have a network of around 280 showrooms, 600 workshops and more than 1,200 spare parts outlets.
The bulk of Honda's distribution in Indonesia is managed by its joint venture partner, Astra International, a domestic conglomerate now controlled by Jardine Matheson Group. MPM's shareholders are chiefly ex-Astra employees.
Indonesia is the world's third-largest motorcycle market after China and India, with 10 motorcycles on the road for every one car. Despite rising domestic consumption, GDP per capita is still only about $4,000, which means cars are beyond the means of most households.
MPM's other businesses include motorcycle components and peripherals, notably lubricant oil, and auto financing for car and motorcycle purchases. Four in five sales are said to involve credit lines from banks of financing companies, with monthly repayments.
Affinity is helping the company set up a vehicle insurance unit - it recently received an operating license - and assisted in the acquisition of a local car rental business, which largely focuses on long-term leases to the corporate market.
The private equity firm, which is currently in the market raising its fourth fund with a reported target of $3.5 billion, has made six investments in Southeast Asia since 2000, five in Singapore and one in Thailand.
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