Asian Private Equity, Firms, Funds, News or Industry Information

The high growth of health care spending in Indonesia is attracting many private equity firms. Indonesia’s PT Lippo Karawaci has announced plans to sell off a 49 percent stake of its Siloam Hospitals. The deal could boost the value of the company to more than $1 billion in Southeast Asia’s largest economy.

The rising middle class in Indonesia is fueling the increase in health care spending and driving growth in the health care sector. Currently, Indonesia has one of the lowest GDP to health care spending ratios on the planet. Analysts expect that to change rapidly in the ensuing years.

This potential is starting to attract private-equity firms to Indonesia and other Southeast Asia countries. Indonesia has a population of 240 million people. KKR & Co. L.P. and Blackstone Group L.P. are looking over the investment climate in the area’s fast-growing countries.

Lippo Group, run by the Riady family, controls the company Lippo Karawaci and announced plans to sell off at least a 20 percent share of Siloam, as reported in Reuters. That sale is expected to fetch $200 to $300 million. Sources close to the impending sale expect that Bank of America Merrill Lynch will run the auction.

If initial bidding matches Lippo’s $1 billion target valuation, the firm could up the sale to 49 percent of Siloam. Sources close to the sale say that Blackstone, Bain Capital and KKR all have an interest in the sale. Other private equity funds that are reportedly interested include TPG Capital and Carlyle Group. All have refused comment due to privacy concerns.

It’s reported that the Riadys are seeking to raise capital in order to fund expansions in other ventures. A bit of uncertainty still surrounds the sale of the Siloam Hospitals group, which operates nine hospitals. This impending sale accounts for about 30 percent of the asset value in Lippo Karawaci.

As mentioned above, the sale could fold if valuations don’t meet Lippo’s expectations. If the valuation falls short, it’s believed that Lippo would cancel the deal and hold a sale next year. It’s believed that the Riadys are waiting for a report from Merrill to get a better feeling for investors’ valuations.

Indonesia’s exploding middle class is attracting global equity funds into the Asian equity market. The impending sale of the Lippo Karawaci property is a symbol of Indonesia’s growth potential and stability.

Blackstone and KKR are setting up offices in Singapore to be close to the Southeast Asia action. Bain Capital is hiring new executives as the competition heats up for equity deals in the region.

Private equity companies see the family-run businesses in Indonesia as prime targets to acquire and gain a foothold in non-core businesses. The Lippo Group has held a number of sales previously, such the PT Matahari Department Stores and stakes in cable TV and Internet service.

Private equity buys in Asia have fallen off in all sectors this year with the exception of health care. Health care deals in Asia have doubled in the first half of the year to $669 million. KKR has already closed two deals this year and is looking at other possibilities.

Obtain further investment insights from David Hand Crescent Point Asia and Crescent Point Private Equity, the leading emerging markets investment management and financial advisory firm primarily focused on the Asia-Pacific and Middle East regions.

Watch this video about Ban Ki-moon, the United Nations Secretary General, gives speech to the press about Health Care in Indonesia.