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Global funds find promise in Southeast Asia infrastructure deals


October 2, 2022 at 11:35 AM

Last updated: Oct 2, 2022 at 11:47am

People stand on a bridge near the Bund after the outbreak of the novel coronavirus disease (COVID-19) on September 6, 2022 in Shanghai, China. REUTERS/Aly Song/File Photo


People stand on a bridge near the Bund after the outbreak of the novel coronavirus disease (COVID-19) on September 6, 2022 in Shanghai, China. REUTERS/Aly Song/File Photo

Buyout firms and asset managers are tapping into billion-dollar infrastructure assets across Southeast Asia, lured by the sector’s growth prospects and stable long-term earnings, bankers and analysts say. .

Data show M&A deal volumes have increased in the sector so far this year, with a healthy deal pipeline making Southeast Asia a rare bright spot for global funds grappling with rising financial costs and market downturns. could be a place.

The industry is also teeming with potentially available assets after a boom in infrastructure development fueled by rapid economic growth.

Telecom operators such as PLDT TEL.PS in the Philippines and operators in Indonesia are grappling with tight margins and high debt, with thousands of cell phone base station sales and leaseback deals.

Ee-Ching Tay, Head of Southeast Asia Investment Banking at Barclays, said:

Nearly 210 deals targeting the industrial and telecommunications sectors in Southeast Asia have been announced so far this year, up from 184 in the same period last year, according to Refinitiv data. sector is declining.

Last year was a record for the sector, with some big deals and analysts saying the short-term pipeline is strong.

That possibility includes Malaysia’s Time.com Bhd TCOM.KL’s data center business, which attracted bids from Digital Bridges Group DBRG.N and US data center firm Equinix EQIX.O. A source familiar with the matter said it could be valued at $600 million.

The source declined to be named, citing the confidential nature of the discussion.

DigitalBridge declined to comment, but Equinix and Time Dotcom did not respond to requests for comment.

In another deal that could be worth up to $3 billion, a source familiar with the matter told Reuters last week that a Canadian pension fund and buyout firm would sell for a fee put up for sale by CVC Capital Partners and its Hong Kong firm. He said he was one of the potential suitors for the road project. Listed partner with assets in Indonesia and China.

“Infrastructure assets are generally backed by long-term contracts, which provide cash flow certainty, allowing them to attract debt at high speeds to improve returns to investors.

As policy makers battle inflation, the region, which is experiencing relatively resilient economic growth in contrast to other regions facing slowdowns and even recessions, is gaining attention.

Indonesia, the region’s largest economy, grew its gross domestic product at 5.4% from April to June, the fastest in a year, and the fastest in decades at 13.7% in the third quarter. It was pace.

By contrast, the IMF forecasts 4.2% economic growth for Asia as a whole this year.

Michael de Guzman, managing director of KKR’s infrastructure team, said “favorable structural factors such as local market reforms and increased urbanization and consumption” have also fueled the rapid growth of investment opportunities in recent years. I’ve been

Analysts also warned that regulatory and other risks remain for investors to assess.

Sharad Somani, Asia-Pacific Head of Infrastructure Advisory at KPMG, said: “Markets that fail to provide a strong pipeline of projects or lack clarity in regulation and legislation can hamper the ability of institutional investors to attract capital. There is a nature.

But there are still plenty of signs that global funds are committed to the sector.

KKR announced last month that it had raised over $4 billion in its latest Asia infrastructure fund.

A number of large M&A deals have already closed in recent months, including a record deal in the Philippines.

In April, Malaysia’s Axita AXIA.KL wireless tower unit Edotco and EdgePoint Infrastructure agreed to purchase thousands of cell towers and related infrastructure from PLDT for Php77 billion ($1.35 billion). Did.

PLDT rival Globe Telecom GLO.PS last month signed a separate sale-and-leaseback agreement for thousands of towers with KKR-backed Frontier Towers and an affiliated investment vehicle of US alternative investment firm Stonepeak. did.



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