TPG, Northstar in cross-investment deal
What does it say about the shifting sands in private equity when an Asian GP is able to get a stake in a global buyout firm? Indonesia-based Northstar Pacific has achieved just that through a cross-investment deal with TPG. The US firm will take 10-20% of Northstar, which will then receive a less than 0.5% interest in TPG.
The agreement is evidence of the global appetite for deals in Southeast Asia and also underlines the attractiveness of Indonesia as a large market where buyouts are possible if you know the right people.
Ashish Shastry, a Singapore-based partner at TPG, will join Northstar, while Patrick Walujo and Glenn Sugita, the Indonesian firm's founders, will become senior advisers to TPG. An investor in a PE firm usually gets a cut of fees and carry. If the TPG-Northstar agreement includes such a clause, sources say it is likely weighted to reflect the fact that the US firm has far more in assets under management. TPG may also get first look at all co-investment opportunities.
Northstar is often described as TPG's Indonesia affiliate. In addition to co-investing in certain deals, TPG was a significant LP in Northstar's first two funds, which closed in 2007 and 2010 at $110 million and $285 million, respectively. Industry participants suggest that, without TPG's capital and support in the early years, the Indonesian firm wouldn't have gained its present momentum. TPG decided not to be an LP in Northstar's latest vehicle, expected to close at $750 million, perhaps in the knowledge that a management-level tie-up was imminent.
Comparisons between Northstar and Newbridge Capital - the Asia-focused GP that was absorbed into TPG in the early 2000s - are inevitable, but deceiving. Newbridge was conceived as a TPG joint venture with Blum Capital; Northstar has until now officially been independent. One of Northstar's LPs tells AVCJ that he wouldn't want to see the firm become a subsidiary of TPG and he doesn't expect this to happen. "Patrick and Glenn want to run an independent firm," the LP adds.
The founders' local relationships are fundamental to Northstar's success. Through his family ties, Walujo is thought to have access to the families that control most of Southeast Asia's largest companies. The acquisition of Buma, Indonesia's second-largest mining contractor in 2010 - a deal which saw TPG and Government of Singapore Investment Corp. (GIC) come on board as co-investors - couldn't have happened without willing sellers in the Widjaja family.
The only international private equity firm that has come close to matching Northstar's track record in Indonesia is CVC Asia Pacific, which has also judiciously cultivated relationships with powerful families in the region.
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