Buyout firms progress in Indonesia healthcare auction - report
The Blackstone Group, Bain Capital, KKR and Abraaj Capital are said to have made it through to the second round of the auction process for a 20% stake in Siloam, Indonesia’s biggest private hospital firm. The deal is expected to be worth up to $300 million.
According to Reuters, Lippo Karawaci, Siloam's parent, is seeking a valuation of more than 20x forward earnings. A 20% holding has been put on the block and, although first-round bids were reportedly below expectations, the stake could rise to 49% if the price is right. Bank of America Merrill Lynch is running the auction.
Siloam operates nine hospitals and is building four more as it looks to serve Indonesia's rising middle class. The company represents around 30% of Lippo's asset value.
Lippo is controlled by the Riady family, which has done business with private equity in the past. In 2010, CVC Capital Partners acquired a 72.6% stake in Matahari Department Store from Lippo's Matahari Putra Prima for $616 million and then restructured it into a joint venture between the two companies. Last year, CVC leveraged its relationship with the Riadys once again, paying Lippo subsidiary First Media $275 million for a minority interest in broadband and cable TV provider LinkNet.
The 20x valuation comes as little surprise given Indonesian family-owned conglomerates' track record in demanding steep prices from PE investors. The limited availability of large assets at realistic valuations is one of the reasons some global buyout firms have struggled in the country.
Last summer The Carlyle Group seemed poised to land a 25% stake in GarudaFood, also having made a bid of around 20x EBITDA, but the deal floundered and the food and beverage producer ended up agreeing a joint venture with Japan's Suntory instead.
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