Permira, one of the world's largest private equity firms, is buying an approximate 20 percent equity stake in Galaxy, a casino and hotel operator in Macau, for a total amount of HK$6.5 billion ($840 million).
It is Permira's first investment in China with an unusual non-control stake. At the deal's completion, founding shareholder Dr Che-woo Lui and members of the Lui family will retain an approximate 52 percent controlling interest in Galaxy. The injection of funds will also deleverage the business, strengthening Galaxy's capital structure with a reduction in debt of HK$2.6 billion, and a net annual interest benefit of approximately HK$250 million. Galaxy's total outstanding debt will fall from $9.2 billion to $6.5 billion, down 29 percent.
The transaction highlights a shift in investment emphasis among the biggest firms as the mega deals have become impossible to finance, while the banks clear the backlog of leveraged loans agreed on before the summer. Charles Sherwood, a partner at Permira, said buyout firms would need to be more creative now that the “magnifying glass” of leverage had been removed.
The deal provides the foundations for the future development of the 2,500 room, suite and villa Cotai Mega Resort, which when complete, will feature the world's second largest casino. Galaxy also has a further 10 million square feet of approved floor area for future expansion. Galaxy operates a number of casinos in Macau including its flagship StarWorld.
Macau is the world's largest gaming market. In 2006, the special administrative region of the People's Republic attracted 22 million visitors, more than half from mainland China, and it is expected that visitors will increase to over 27 million in 2007.
Permira has expertise in the international gaming sector through its investments in Gala Coral, Europe's largest gaming company, and in Sisal, the second largest lotto operator in Italy.
ICICI launches $2bn real estate fund
ICICI Venture Funds Management, India's largest private equity firm, plans to float a $2 billion real estate fund in November. The fund, which will be the largest in the country when it launches, will have a ten year lifespan, and the firm plans to invest all of the capital within three years. The fund will raise money from both domestic and international investors, and will target commercial and residential developments in India's 12 largest cities. The fund will also acquire land. Last year ICICI launched a $500 million real estate fund, of which it has reportedly invested 70 percent.
Goldman, Aetos to buy Japanese
property group for $1.1bn Goldman Sachs Group and New York-based private equity real estate firm Aetos Capital have made an offer to buy Japanese property company Simplex Investment Advisors for ¥124.7 billion ($1.1 billion; €783 million). Tokyobased Simplex, founded in 2002, owns 179 properties in cities throughout Japan. The joint venture made an offer for 80 percent of the company at 215,000 yen per share. Japanese brokerage firm Nikko Cordial, which owns 42.5 percent of the company, has agreed to sell its stake.
Calpers commits $500m to Asia fund
The California Public Employees' Retirement System (CalPERS), the largest US pension, has committed $500 million to the new real estate ARA Asia Dragon Fund. The fund is sponsored by ARA Asset Management, a member of the Cheung Kong Group, one of the leading real estate companies in Asia. ARA has $4.7 billion under management. In addition to the $500 million commitment, CalPERS also allocated $500 million for potential co-investment opportunities with the ARA Asia Dragon Fund, which will invest in private real estate. The Fund anticipates approximately $1.5 billion in total commitments by CalPERS and other investors not including co-investment allocations. Its target annualized net return on investment is 18 percent.
Westport invests $100m in Indian residential deal
Connecticut-based Westport Capital Partners is developing a residential complex in Hyderabad, India. According to the firm, total development costs will be approximately $100 million (€70.5 million). Located on 60 acres of land, the development will be comprised of 330 villas at around 3,500 square feet each. The project, to be done in phases with a local developer, has already broken ground and is slated for completion in 2011. The villas will be sold to private owners with several units already reserved.