Nikkei Asian Review

Deal-makers give Philippines a fresh look

An Italianni's restaurant in Manila operated by the Bistro Group, a company controlled by private equity fund NavegarMANILA — Private equity funds have traditionally shown little interest in the Philippines. But the country’s recent strong economic performance and favorable demographic trends are putting it on their radar.

In November, Hong Kong-based ADM Capital and an affiliate of Baring Private Equity Asia announced they would lead a $150 million financing package for the construction of five high-end office buildings next to Clark International Airport, northwest of Manila. The deal ranks as one of the largest bets on Philippine property by foreign investors in recent years.

U.S.-based private equity firms Carlyle Group, TPG Capital and Lone Star Funds were among the reported bidders earlier this year when the government made an abortive attempt to auction a 73.9% stake in United Coconut Planters Bank. Officials plan to restart the sale process next year, following the resolution of litigation over the government’s ownership stake. KKR & Co., another big U.S. based private equity group, stepped gingerly into the Philippine market in July by providing advisory services to a local vaccine company.

The Philippine economy is the big draw, with growth averaging 6.2% between 2010 and 2014. A government focused on fighting corruption, a growing population of 92 million with an expanding middle class, and a recently established investment-grade credit rating are helping, too.

“Foreign funds are knocking on our doors, looking for deals more often than ever, with guys flying in from regional bases like Hong Kong and Singapore,” said Martin Lichauco, who until recently was the head of the private equity group at Fortman Cline Capital Markets, a boutique advisory company that works with midsize businesses seeking capital. Large deals remain rare. One of the few to close was CVC Capital Partners’ $300 million purchase in April 2013 of an 80% stake in SPI Global Holdings, an outsourcing services unit of Philippine Long Distance Telephone.

The scarcity of major deals relates to a preference among the Philippines’ business elite to trade assets with each other. “There are just not that many big companies,” said a senior executive with another boutique advisory in Manila. “When deals get done, they have a tendency to be more club deals. Filipinos are more likely to deal with other Filipinos than international investors.”



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