In the past month, a handful of large private equity deals in Asia have collapsed or been put on hold, contrary to suggestions that Asian private equity activity will not be as adversely affected by current financial turmoil as it has been in markets in North America and Western Europe.
But as one banker told PEO, there is no funding available for large deals, even in this part of the world, and that is responsible for the growing number of failed deals.
Earlier this week, Hong-Kong based telecommunications provider PCCW cancelled the sale of a 45 percent stake in HKT, its IT, telecommunications and media business, because “the recent market downturn has significantly impacted the offers received”. Firms in the running for HKT assets included MBK Partners, Macquarie, Providence Equity Partners and TPG.
According to a banking source involved in the sale, the deal would have been worth about $1.2 billion. UBS was advising PCCW on the sale and had promised to underwrite one-third of the debt and needed at least two other banks to provide the remainder, but no bank was willing to do so.
A week earlier, Shenzhen telecommunications company Huawei Technologies scrapped plans to sell a stake of about 50 percent for an estimated $2 billion in its mobile products unit, citing similar concerns. The firm said that the “interests of the company are best served by postponing the sale process” in light of current market conditions and “prevailing economic uncertainty”. Bain Capital and Silver Lake Partners were the two bidders that submitted formal offers, after having edged out Kohlberg Kravis Roberts and Goldman Sachs.
And a few days prior to Huawei’s decision, Japan’s Daito Trust Construction, a real estate development and management company, also halted its auction which would have fetched around $6 billion. The frontrunner in that deal was a consortium led by Japanese buyout firm Unison Capital.
Conditions are such, the banking source said, that funding is currently not available even for the acquisition of solid revenue-generating assets such as PowerSeraya, a Singaporean power generating company that Singaporean sovereign fund Temasek is selling. The deal, if completed, will be worth about $2.5 billion.
Temasek could very well postpone its sale, as well, as the “wait and see” attitude prevalent in many Western countries being rocked by the global financial crisis is, indeed, present in Asia, too.