CVC to exit Softex Indonesia with 3.3x return - update

The private equity firm expects to generate a money multiple of 3.3x and an IRR of 30% on the investment, according to a source familiar with the situation.

CVC took a minority stake in Softex five years ago, paying an undisclosed sum. It is one of a string of partnership investments the GP has made in Southeast Asia, working in tandem with founders or family groups. All the incumbent shareholders in Softex appear to be exiting.

Founded in 1976 as an apparel manufacturer, Softex moved into the female consumer products space after it was noted that factory workers were taking home unwanted remnants of fabric to use as sanitary towels. According to Kimberly-Clark, the company generated sales of around $420 million last year, 80% of which came from diapers. It is the second-largest player in the domestic market with the Sweety and Happy Nappy brands.

Feminine care and adult care account for the remaining sales. Softex ranks number three in Indonesia for feminine care under its eponymous brand and is number two in adult care with the Confidence brand.

CVC’s investment was in part predicated on demand growth from Indonesia’s relatively young population – 40% of citizens are aged below 25 and 4.8 million children are born each year. Rising consumption driven by rapid urbanization and an emerging middle class is another contributing factor. Indonesia is the world’s sixth-largest diaper market with annual sales of $1.6 billion.

Softex also emerged as a test case of CVC’s environment, social and governance (ESG) policy in Asia. Management was encouraged to adopt a proprietary technology platform for tracking monthly energy consumption, allowing the company to set efficiency targets and reduce its carbon footprint. This initiative was expanded to include water use and material waste.

The GP points to it as an example of how minority investors can gain traction with an encouragement-first approach, focusing on sound, verifiable business values rather than overwhelming companies with an entire suite of tools in one go. “If you can initially make it smaller-scale and demonstrate there’s value before they commit to rolling that out more broadly, that’s always more helpful,” Alvin Lam, a senior managing director at CVC, told AVCJ last year.

Kimberly-Clark said the acquisition immediately improves its currently limited position in Indonesia to one with strong market share in key personal care categories across Southeast Asia’s largest economy. The company – which owns brands such as Huggies, Kleenex, Scott, and Andrex – generated $18.5 billion in sales last year across 175 countries.

“Softex Indonesia has a strong, growing and profitable business with a portfolio of brands loved by Indonesian consumers,” said Aaron Powell, president of Kimberly-Clark’s Asia Pacific consumer business, in a statement. “This acquisition provides an opportunity for Kimberly-Clark to accelerate our growth in Southeast Asia, and we look forward to combining our strengths in innovation and brand building to expand on Softex Indonesia’s continued success.”

CVC invested in Softex from its fourth Asia fund, which closed at $3.5 billion in 2014. Other liquidity events from this vehicle include partial exits from Indonesian sports retailer MAP Aktif Adiperskasa and Japanese broadband provider Arteria Networks and the secondary sale of Japanese cleaning and care services business Hitowa Holdings. CVC closed its fifth Asia fund at $4.5 billion earlier this year.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Southeast Asia
• Trade sale
• Consumer
• Indonesia
• CVC Capital Partners