Packaging for a strategic exit

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Packaging for a strategic exit

• May 19, 2005
• Peter Amour
• CEO, AIF Capital

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AIF Capital

• Asia-based independently managed private equity
  firm overseeing US1 billion since 1994
• Pan-Asia, multi-industry investing through two
  funds

Aggregate Investments by Region
Note Based on total amount invested
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Asian private equity exits increasing
For 1H2004, PE divestment of US4.4b was already
greater than 2000-2003 average full year amount
of US3.7b
Asian Private Equity Divestments
Source Asian Venture Capital Journal
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Exits by strategic sale and IPO both increasing
In 2004, the number of recorded strategic sales
and IPOs both increased over 100, and each
account for 47 of total
Asian Exits by Type
Source Asian Private Equity Review
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Drivers of strategic sales FDI
FDI Strong GDP growth and economic
liberalization continue to attract FDI
FDI into Developing Asia
Source IMF WEO April 2005
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Drivers of strategic sales MA
MA MA is increasing, although Asian MA as a
percentage of GDP is far below developed markets
MA Value in Asia, US, W. Europe
Asian MA Underpenetrated
Source IMF WEO April 2005, Bloomberg
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Profile of strategic sales in Asia

• Since 2003, 65 of acquirers by number are from
  Asia
• Strategic exits by geography
• Greater China 27
• Japan 25
• India 23

Source Asian Private Equity Review
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What specific features do strategic buyers want?

• Control
• Know what they are buying
• Transparent and reliable financial information
• Clean and efficient ownership structure
• Clean financial structure
• Complete regulatory approvals
• Strong management team
• Local knowledge with global best practices
• Continuity of management team after ownership
  change

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AIF Capitals experience in strategic exits

• Fully divest investments
• Partnering with strategic players to enhance
  value for eventual exit

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Packaging for strategic exits pre-investment

• Clarify exit options in documentation to
  facilitate delivery of control to strategic
  investor
• If not control position, then establish strong
  minority rights to ensure high quality business
  and accounting practices
• Ensure proper ownership and business structure
• Establish effective dispute resolution mechanism

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Packaging for strategic exits post-investment

• Develop international calibre management team
• Optimize capital structure for divestment
• Bring in additional shareholders if necessary
• Grow business to critical size before exit

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AIF Capital examples Greater China
China Toll Road Company
Greater China Port Companies

• Diversified 5 toll roads (275km), 2 bridges
  across 5 provinces
• AIF Capital has control
• Regulatory approvals
• Track record of robust cashflow remittance out of
  China
• Attracting strong interest from strategic
  investors

• Two greater China port companies sold to
  strategic investors
• Strong exit clauses provided AIF Capital leverage
  to pressure for sale to strategic investors
• Attractive exit results achieved

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AIF Capital examples South Asia
Pakistan Mobile Investment
Indian Mobile Investment

• In 1997, AIF Capital invested into Pakistan GSM
  operator
• Unfavourable regulatory environment undermined
  business
• In 1999, Orascom Telecom (OT) emerged from
  Egypt aggressively expanding into Africa and
  South Asia
• In 2001, AIF Capital used its strong minority
  rights to facilitate OTs acquisition in Pakistan
  and swapped into OTs London-listed GDRs
• OT achieved great success in Egypt, Algeria,
  Pakistan, others 15m subscribers, market cap of
  US9b
• Attractive exit through capital markets

• In 1997, AIF Capital invested into mobile
  operator covering 3 states
• Heavy license payments and partner disputes
  undermined business
• In 1999, AIF Capital used its strong minority
  rights to facilitate Bhartis acquisition of the
  company and swapped into Bharti shares
• Bharti pursued a successful pan-India acquisition
  strategy and listed in 2002 currently 12m
  subscribers and market cap of US9b
• AIF Capital subsequently achieved attractive exit
  through capital markets

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AIF Capital examples Southeast Asia
Singapore Supply Chain Manager of Agri-products

• In 2002, AIF Capital invested in Olam, a
  Singapore-based supply chain manager of
  agri-products handling 14 products sourced from
  over 35 countries and sold to over 50 destination
  markets
• AIF Capital introduced strategic investors
  Temasek and IFC to enhance the value of Olam
• Olam successfully listed in Singapore in February
  2005, one of the largest listings in Singapore
  since 2004
• Share price up over 30 since IPO Olam to be
  included in MSCI Singapore Country index from
  June 2005
• Current market valuation at several times AIF
  Capital cost

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For further information, please contact AIF
Capital Limited Suite 3401 Jardine House 1
Connaught Place Central, Hong Kong www.aifcapital.
com info_at_aifcapital.com