Issue 12

Columbia’s Asia hospital business draws interest from KKR, CVC

Columbia Pacific Management’s Asian hospital business has drawn interest from global private equity players, including KKR, CVC and Carlyle, in a sale the U.S. investment company has pegged at about $2 billion, sources with knowledge of the matter said. 

Columbia Asia is offering a portfolio of 30 mid-sized medical facilities, mainly in India and Malaysia, where healthcare spending is growing rapidly. A successful deal would make it the biggest transaction in Southeast Asia’s hospital sector in nine years and one of the largest in Asia over the last decade, according to data from Refinitiv. 

One of the sources said the sale drew in first round non-binding bids from a number of financial investors, including sovereign wealth funds. Interest also came from Ramsay Sime Darby, a venture of Malaysia’s Sime Darby Bhd and Australian-listed Ramsay Health Care Ltd, and Asia’s largest premium hospital group IHH Healthcare Ltd, the sources said. KKR, Carlyle, CVC, IHH and Ramsay Healthcare declined comment. There was no immediate response to an email query sent to Columbia Pacific. 

The sources declined to be identified as they were not authorised to speak to the media. Monday was the deadline for first round bids, the sources said. “This type of asset doesn’t come to the market too often, and the opportunity to invest in this is not lost on most PE players,” said one source. Columbia Asia, part of Seattle-based Columbia Pacific Management, opened its first hospital more than two decades ago. 

It has 12 hospitals each in India and Malaysia, three in Indonesia, and two hospitals and one clinic in Vietnam. Columbia Pacific has a separate healthcare venture in China. Columbia Asia says on its website that it focuses on setting up mid-size hospitals in residential areas for accessibility and efficiency and to help keep costs down for consumers.


From – Deal Street Asia


Need to find new ways to strengthen the airline industry, says Khazanah

As the country’s national carrier Malaysia Airlines Bhd (MAS) reels under losses, its investor Khazanah rallied for identifying new ways to strengthen the country’s airline industry. 

“The airline industry provided a huge amount of actual economic benefits, generating spillover income to various sectors of the Malaysian economy such as tourism. If you look across the supply chain, plenty of other (industries) make money.” 

We just have to find new ways, essentially, for the airlines themselves to reach a much more efficient state and that may require us to re-look at the industry, potentially restructuring the industry itself. I think it (restructuring) is quite conceivable looking at the industry, where demand is not growing as fast as capacity growth,” Khazanah Nasional Bhd managing director Shahril Ridza Ridzuan said during a panel discussion at the Invest Malaysia 2019 conference on Tuesday. 

Shahril added that it is important for the government to understand and compare the costs of maintaining the loss-making MAS to a much bigger potential loss to the economy if it were to stop operating. He said that Khazanah’s investment in MAS remains relevant despite the airline missing its target to breakeven last year and causing the sovereign wealth fund an RM 7.3 billion ($1.78 billion) impairment loss in 2018. 

Last week, Malaysia’s Prime Minister Mahathir Mohamad said he’s studying options for MAS, including whether to invest more funds, sell it off or even shut the company down. Given Khazanah’s new mandate, a new special purpose vehicle may be needed to invest in MAS if another attempt is to be made to revive the airline, according to economist and Sunway University’s economic faculty director Yeah Kim Leng. 

“Given its financial constraints, the government will likely be eyeing more private capital. MAS will have to cut cost, raise load factor and revenue as well as its overall efficiency, productivity and cost competitiveness, all without sacrificing safety, comforty, service quality and convenience for its passengers,” he added. 

Yeah said political interference was one of the key factors behind MAS’ failure to turnaround its business. “This is undoubtedly one of the key factors underlying some of the high-cost contracts the airline has entered into previously High staffing and cost structure, management issues, erosion in competitive ability in addition to bad luck, having to cope with back-to-back tragic incidents (MH370 and MH17) are the key reasons for the continuing dismal performance,” he told DEALSTREETASIA. 

MAS has been grappling with poor international perception after facing two aviation tragedies — the disappearance of MH370 and the shooting down of MH17 — in 2014. In the same year, it kicked off a 12-point recovery plan after it was taken private, asking for RM 6 billion ($1.47 billion) to delist and restructure. The national carrier also lost two of its former CEOs, including current Ryanair COO Peter Bellew who left MAS after a year, and current Emirate Group chief digital and innovation officer Christoph Mueller, who left MAS in 2016. 

“It has to be run more like a commercial airline rather than a government-owned national carrier. In the case of the latter, the prevailing mindset is that the government will not let it fail irrespective of losses thereby creating a moral hazard situation. “Other priorities take precedence to financial sustainability such as keeping staff, morale and high cost suppliers and vendors instead of becoming ‘leaner’ and ‘hungrier’ in the entrepreneurial sense as competition intensity ratchets up,” said Yeah.

From – Deal Street Asia

China’s GoPro-rival Insta360 targets IPO by 2020 after raising $30m

Insta360, the GoPro-rival that won awards at the world’s biggest electronics show in 2018, is considering a domestic initial public offering as soon as next year. 

The Shenzhen-based maker of 360-degree cameras and virtual reality devices has raised $30 million from investors including Everest Venture Capital, MG Holdings and Huajin Capital, founder Liu Jingkang said. It now plans to deepen research while expanding overseas, he said in a phone interview. 

Longer term, the startup is pondering a listing but hasn’t made a final decision on venue, which could include China’s upcoming technology board or the existing Growth Enterprises Board in Shenzhen, the founder said. Founded five years ago, Insta360 is among a handful of Chinese hardware upstarts gunning for GoPro Inc. in the sports camera business. 

Leveraging its proximity to the Chinese manufacturing hub of Shenzhen, it’s launched a slew of products that’s now siphoning away market share from its U.S. counterpart. Insta360 is formally known as Shenzhen Arashi Vision Co. and counts IDG, Suning Holdings and Qiming Venture Partners among its backers. 

Its gadgets include the Insta360 ONE and the $400 ONE X, which use 360-degree imaging and has drawn favorable comparisons to GoPro, the label that catapulted action photography into the mainstream. GoPro itself is struggling to attract a wider customer base for its cameras beyond outdoor enthusiasts. 

Rivals offer cheaper models, while smartphone cameras have eaten away at its market. Its shares hit a record low in late 2018, less than five years after going public. Liu argues that his cameras try to cater to consumers by, among other things, being lighter and easing the editing process. He dismisses the notion that Insta360’s products are carving out market share through price. 

“While some other Chinese companies may start from low-end products, we will keep a relatively healthy margin and will not sell products at a significantly lower price than competitors,” he said.

From – Deal Street Asia

True Incube joins Korea Venture, LINE Games to set up PE fund

True Incube, a tech incubator and the wholly-owned subsidiary of Thai-listed telecom firm True Corporation, has teamed up with the government-backed fund of funds management firm Korea Venture Investment Corporation (KVIC), LINE Games Corp and a newly-formed JV firm True-Kona to set up a private equity fund in Cayman Islands. 

According to True’s disclosure to the Stock Exchange of Thailand on Monday evening, the fund, named LINE GAMES-TRUE-KONA Global Limited Partnership, will have an initial registered capital of $22.72 million. However, the filing did not disclose the fund size. 

KVIC is the major shareholder with a 40-per cent stake, followed by LINE Games Corp at 32 per cent while True Incube and True-Kona will hold 26 per cent and 2 per cent, respectively. The fund will seek opportunities to invest in high potential companies, focusing on games and technology. 

“True Incube would be entitled to the right to publish games in Southeast Asia which would be leveraged among True Group’s multiple platforms, increase revenue growth potential and generate future capital gain,” said True’s co-group CFO Yupa Leewongcharoen. 

True Corporation has been one of the main investors in Silicon Valley-based venture capital fund 500 Startups since 2013. As a startup incubator and venture capital firm, True Incube has focused on partnering with global venture capital firms and companies including 500 Startups, Japan’s Itochu and China’s Ant Financial to build and strengthen the Thai startup ecosystem. 

KVIC was launched in 2005 as a Korean government agency tasked to promote the development of Korean venture capital and private equity fund industry. It currently has assets under management worth $1.2 billion. 

Its primary focus is technology-oriented venture firms in several sectors such as ICT, green energy and life sciences. True-Kona is a 50:50 joint venture firm between True Incube and Kona Venture Partners as a fund manager of the newly-set up fund in Cayman Islands.

From – Deal Street Asia

US fintech FIS to buy Worldpay for $35b in biggest-ever payments deal

U.S. fintech Fidelity National Information Services Inc (FIS) has agreed to buy payment processor Worldpay for about $35 billion, the biggest deal to date in the fast-growing electronic payments industry. The deal is part of a wave of consolidation in the financial technology sector as firms seek to bulk up on payment systems that are increasingly used for online and high street sales. 

“Scale matters in our rapidly changing industry,” said FIS Chief Executive Officer Gary Norcross, who will lead the combined group that will be a global powerhouse in providing the infrastructure for banking and payment systems. Global payments are set to reach $3 trillion a year in revenue by 2023, according to consulting firm McKinsey, as more people switch from cash to digital payments.” 

This was an opportunistic move by FIS and was primarily triggered by the need to stay ahead of competitors,” said a source close to the deal. The industry’s growth has kept deals for payment systems rolling even as merger moves in other sectors have stalled on concerns about trade tensions and a global slowdown. 

U.S.-based Fiserv Inc bought payment processor First Data Corp in January for $22 billion, while Italy’s Nexi plans to list in what could be one of Europe’s biggest initial public offerings (IPOs) this year. The FIS deal, valuing Worldpay at about $43 billion when debt is included, comes a little more than a year after U.S. firm Vantiv paid $10.63 billion for the payments firm, which was set up in Britain and spun off from Royal Bank of Scotland in 2010. 

“Vantiv had yet to realise all the synergies from the Worldpay merger but FIS’s offer was too good to be refused,” the source close to the deal said. FIS and Worldpay combined will have annual revenue of about $12 billion and adjusted core earnings of about $5 billion. 

“By acquiring Worldpay, FIS should accelerate its revenue growth, significantly expand its position in the merchant acquiring space and generate many synergies,” said Michael Schaefer, portfolio manager at Union Investment, a Worldpay shareholder. Worldpay is a major player in card payments, particularly in Britain, while FIS focuses on retail and institutional banking, as well as payments. 

Breadth of coverage. 

“You need scale to win at payments processing and this deal certainly gives the two companies incredible breadth of coverage,” said Russ Mould, investment director at AJ Bell. Worldpay shareholders will receive 0.9287 FIS shares and $11 in cash for each share held, valuing the company at $112.12 per share, a premium of about 14 percent based on the stocks’ Friday closing, according to Reuters calculations. 

Shares in Worldpay, which has provided payment processing services for more than 40 years, were up 10.5 percent at $108.99 and Fidelity’s shares were up 2.2 percent at $111.25 in premarket trading on Monday. The companies said the deal would result in an organic revenue growth outlook of 6 to 9 percent through 2021, and $700 million of total core earnings savings over the next three years. 

The companies said they expected $500 million of revenue savings and aimed to deliver nearly $4.5 billion of free cash flow in three years. Under the deal, shareholders will own about 53 percent in the combined firm and Worldpay shareholders about 47 percent. 

Worldpay‘s CEO Charles Drucker will become the executive vice-chairman. FIS, which has grown through a series of acquisitions in the past 15 years, offering software and outsourcing services banks, asset managers and insurers. 

Centerview Partners and Goldman Sachs were financial advisers to FIS, the companies said, adding that Willkie Farr & Gallagher LLP served as FIS’ legal adviser in the transaction.

From – Deal Street Asia
 All Rights Reserved 2019.

Vision Ventures Management Berhad, 
22-3a & 22-5, Menara Oval Damansara
+603 7733 4593

[References] [Disclosure]