CVC and Lippo, a long story of mutual collaboration

Bareksa.com | TheJakartaPost.com - For the third time, the Luxembourg-based global investment company CVC Capital Partners Ltd. has struck a multi-million dollar deal with Lippo Group, a conglomeration controlled by the Riady family.

In the latest deal worth Rp 2.2 trillion (US$166 million), CVC agreed to buy a 15 percent stake in hospital operator Siloam International (SILO) from Lippo Karawaci (LPKR) and Lippo's brokerage firm Ciptadana.

Most of the proceeds will be used to expand Siloam's hospitals, Lippo said in a filing to the Indonesia Stock Exchange.

LPKR management in a public expose said CVC had completed the placement of 9 percent of SILO shares, and it would take time to process a rights issue to facilitate the placement of the remaining 6 percent. The firm expected the corporate action to be complete by the end of 2016.

The recent collaboration is expected to give benefits to both parties, as seen in previous deals. Let's review the past partnerships between CVC and Lippo Group in the capital market.

Matahari Store transaction and Link Net

In 2010, CVC and Matahari Putra Prima (MPPA) formed a joint venture company named Meadows Asia Company (MAC), to complete the acquisition of Matahari Department Stores (LPPF).

CVC has an 80 percent stake in MAC while Lippo Group has 20 percent through MPPA. In April 2010, MAC bought 2.68 billion LPPF shares, equal to 98 percent ownership, at an average price of Rp 2,705.33 per unit.

In March 2013, CVC handed over its stake in Matahari Department Stores to Mulipolar — another subsidiary of the Lippo Group. In exchange, CVC received 20 percent of MAC shares that were previously owned by Lippo Group through MPPA. 

After the transaction, Multipolar effectively held 25 percent of shares in LPPF, while CVC had 73 percent. LPPF's share price more than doubled from Rp 3,900 to Rp 10,400 per unit after the transaction. 

Chart: Matahari Department Store stock price

Source: Bareksa.com

Benefiting the situation, CVC gradually sold LPPF stock to the public and scored massive gains. The last time CVC held LPPF shares was in March 2015 with only 2 percent ownership. Now, the LPPF share price has reached Rp 17,000 apiece, six times higher than the price during the 2010 transaction.

LPPF now is no longer listed in CVC's investment portfolio, but Lippo's broadband and TV cable provider is still there. In 2011, the private equity group invested Rp 2.4 trillion to secure 34 percent ownership of Link Net (LINK).

As of July 2016, CVC still held 33 percent of Link Net shares. Meanwhile, the LINK stock price nearly doubled to Rp 4,300 compared to Rp 2,400 in its initial public offering in 2014.

Who is CVC?

The company manages capital on behalf of over 300 institutional, governmental and private investors worldwide. Over the years, CVC has secured commitments of more than $71 billion in funds from its investors.

In the private equity business, the company uses these funds to acquire controlling or significant minority interests in European, Asian and North American companies, such as security software Avast and commercial sports management Formula One.

CVC’s investments in Indonesia include Link Net and Map Aktif Adipersada — a subsidiary of Mitra Adi Perkasa (MAPI), the owner of Planet Sports, Sports Station and PT Softex Indonesia. (ags)

(Translated by and in collaboration with TheJakartaPost.com)