Affinity closes $700M fund

Affinity closes $700M fund

Byline: Vyvyan Tenorio

The newly independent Affinity Equity Partners Ltd., formerly UBS Capital Asia Pacific Ltd. until its spinout in March, has closed a $700 million fund to focus on emerging opportunities in control-oriented buyouts in the region.

Previously operating under the UBS Capital umbrella, founding partners Kok-Yew Tang and David Lai led a team that made direct investments for UBS. The new fund, which closed well above the original $500 million target, has an undisclosed contribution from UBS, but the capital comes mostly from third-party investors, said sources close to the fund.

Credit Suisse First Boston was placement agent.

Among the limited partners in Affinity Asia Pacific Fund II are Adams Street Partners of Chicago, Allianz Private Equity Partners of Munich and New York, AlpInvest Partners NV of Amsterdam, Pantheon of London and San Francisco, Government of Singapore Investment Corp. and Temasek Group, the Singapore government’s direct investment arm.

Affinity, now managing more than $1 billion in assets, had been in the making since UBS scaled back its private equity investing activity in 2001, sources said. Its principals, who differentiate themselves through their local origins, will continue to focus on control-oriented investments.

“They’re putting together strategic entities that international companies will want to own,” said one source who requested anonymity.

The fund will concentrate on the Asia Pacific region’s more developed economies, investing $50 million to $150 million in equity. It has offices in Hong Kong, Seoul, Singapore and Sydney.

Sources said the team has returned 100% of UBS’ original capital. The existing portfolio, which includes South Korea’s Haitai Confectionary Co., auto parts maker Mando Corp. and its climate control subsidiary, Mando Climate Control Co., is expected to return 2.5 times to 3 times the costs. The new fund targets a 30% internal rate of return.

Affinity is exiting Haitai, which it acquired with CVC Asia Pacific Ltd. and J.P. Morgan Partners Asia Ltd. in 2001. Negotiations are under way with South Korea’s Crown Confectionary Co. Ltd. for a sale tagged at W600 billion to W700 billion ($532 million to $621 million), which will yield a profit for the backers of more than 2 times their money.

Affinity also sold auto finance company SDL Leasing Singapore Pte. Ltd. to GE Capital in 2002 for “attractive returns,” sources said.

Although leveraged buyout activity is still a relatively young industry in Asia, Affinity has benefited from the recent emergence of leveraged lending by local institutions. In Seoul, for example, Mando Corp. has gone through two recapitalizations, allowing Affinity to cash out more than two-thirds of its money. Affinity also has taken out dividends from Mando’s subsidiary and Haitai.

COMPANY: Affinity Equity Partners Ltd.

COMPANY: Credit Suisse First Boston

COMPANY: Adams Street Partners

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