As a fund partner, private equity funds committed to each investor within the prescribed time limit specified amount of money invested. Fund this as a limited partner capital commitments. Capital sum equal to the funds committed to the total. To participate in fund, limited partnership and general partner must make a capital commitment.
F E A T U R E KL-based private equity company Navis Capital Partners recently closed its sixth fund at USD 1.2 billion. Chairman Richard Foyston says that Southeast Asian agribusiness- based companies show higher than average returns on assets and equity, making it a lucrative sector both for investors and fund managers. RACHAEL PHILIP reports. To gain good returns Richard Foyston feels companies must evolve quite a bit. Agribusiness proves lucrative for Navis A gribusiness makes up just 10% of market capital in Southeast “We avoid anything that is large-scale. We also like to invest aggressive,” Mr Foyston explained. Navis started with USD 70 million Asia but food and agribusiness in businesses that do not see too in funds. Today, they manage USD 3 companies in the region rake up an much government influence in the billion in capital commitments. The average of twice the return on assets industry. This is another reason why private equity firm, which has offices and one-and-a-half times the return we like the SME sector because in Bangkok, Hong Kong, Singapore, on equity. competition is less encumbered,” Mr Sydney and Mumbai, caps a “It’s a relatively profitable Foyston said. maximum of 20% of its funds for any segment,” said Navis Capital Partners one sector. Strong growth Chairman Richard Foyston. He described Navis as “a hybrid The private equity firm targets Based in Kuala Lumpur, Malaysia, between equity ownership, private high-potential small-and-medium- Navis was founded in 1998. It started equity and consultant. We try sized (SME) companies for buyouts. with just three people on its team. It to be active, useful, controlling It believes in keeping its portfolio now has 75 staff. shareholders” . diversified across sectors and “We have a big team because Since its first investment in 2000, across countries, and invests in we’re active in all of our portfolio the four founding partners of Navis most sectors except real estate, companies. We’re controlling have had their eyes trained on technology-based businesses and shareholders so if we decide we Southeast Asia, where all have lived what it terms as unproven business want to make changes we can, and worked for a number of years, models. although we’re not particularly gaining professional experience 26 AGRIFOOD MAGAZINE – February/March 2011 from management consulting firm The Boston Consulting Group. Navis’ food and agriculture portfolio Success stories Name Date Country Industry One of their bigger success stories Bangkok Ranch (Exit–2007) Oct 2000 Thailand Duck processing to date is the acquisition of Thai duck processing company Bangkok AgriPure (Exit–2005) Sept 2000 India Vegetable processing Ranch in October 2000. Bangkok Ranch emerged from Dome Coffees (Exit–2008) Dec 2003 Australia Coffee/Casual dining the Asian financial crisis bruised. It was insolvent and was undergoing a Birdland Nov 2004 Hong Kong Fast food restructuring process at the turn of the century. Sky Gourmet (Exit–2007) Sept 2004 India Airline catering “The company didn’t have a financial structure that could survive Mars Restaurant (Exit–2007) Oct 2005 India Casual dining/ the 1997 Asian financial crisis. We Catering acquired control of Bangkok Ranch from the company’s creditor banks. Dunkin’ Donuts Apr 2006 Thailand Fast food The agribusiness sector in Thailand is quite competitive, especially the Wendy’s July 2006 Australia Fast food export-oriented businesses, and Bangkok Ranch was an opportunity Nirula’s Jun 2006 India Fast food we liked,” recalled Mr Foyston. Navis retained Bangkok Ranch for Duck To/Bangkok Ranch Aug 2007 Thailand Duck processing close to eight years, the norm for equity companies. Over the years Hui Lau Shan Jul 2007 Hong Kong Fast food the company emerged as one of the largest duck producers in the Golden Foods Siam Sept 2009 Thailand Chicken processing Navis @ a glance… Started by four founders in 1998 who each own a quarter of the company Navis only invests in high potential SMEs with a potential to grow Over the years they’ve broadened their geographical scope from Southeast Asian countries to India, Australia, Hong Kong and China They are not involved in the day-to-day running of the companies but are active and influential shareholders. For instance, they help find or improve the management team, help with resources, marketing, etc. All this is done with an idea for a long-term plan for change The partners are typically present at least once a month in the companies they’ve acquired Investor returns should come from top and bottom line investments and growth opportunities and not via leverage. “For our kind of private equity returns each company has to evolve quite a bit. We only invest in companies where there is basis for some growth and where we think we can be helpful,” said Mr Top and above: Bangkok Ranch has Foyston. evolved into a duck processing company with large upstream operations. AGRIFOOD MAGAZINE – February/March 2011 27 F E A T U R E The structure of a generic private equity fund Limited Partners (Investors) Private Equity Firm (public pension funds, corporate pension funds, insurance companies, (General Partner) high net-worth individuals, family ofiices, endowments, foundations, fund-of-funds, sovereign wealth funds, etc.) Ownership of the Fund Fund/Investment Management Private Equity Firm (Limited Partnership) The Fund’s ownership of Source: Wikipedia.org the portfolio invesments Investment Investment Investment world outside China and is a leading based duck processing company Foods and Bangkok Ranch. They’re supplier of cooked duck to Europe. with large upstream operations in both in the same fund, and have Bangkok Ranch then merged with Cherry Valley. essentially the same ownership,” said Dutch company Tomassen Duck- Cherry Valley is the biggest duck Mr Foyston. To, a major player in the European genetics producer in the world and With Golden Foods, which was table duck market. The merged has captured a significant position in acquired in September 2009, Navis entity, which operated as Tomassen- China, selling its genetic stock. is not planning so much to turn the Bangkok Ranch in Europe, grew to Mr Foyston also noted the growth company around but to work on become a world leader in the duck of Australian beverage chain Dome expansion. business. Coffee. Navis acquired Dome in Navis’ Fund V acquired the new set December 2003 and before it exited up in August 2007. In April this year the company in 2008, Dome had Navis added UK duck giant Cherry gained a strong foothold in Asia. Valley to the combination. During that time Dome expanded “Cherry Valley was a long-time from about 40 stores mainly situated supplier to Bangkok Ranch. We’ve in Australia, to about 80 stores in came to know the management Asia and Australia. quite well. We were aware of the Navis’ food and agribusiness somewhat unusual ownership of portfolio features a number of Cherry Valley. acquisitions in fast food restaurants “It was owned by a family trust in such as Birdland, Dunkin Donut the UK. We knew at some point the and Wendy’s. It also acquired Indian family trust would sell the business Airline’s catering company Sky so we were watching it for a long Gourmet, vegetable processing time,” said Mr Foyston. company AgriPure and Golden “Bangkok Ranch has grown Foods Siam, a Thai chicken into something quite big. From processing company. a primarily Thailand-based “We’re looking at trying to take Navis’ food and agribusiness portfolio also 50%-domestic, 50%-export duck advantage of cross company features a number of acquisitions in fast company it’s now a Thai & European- opportunities between Golden food restaurants such as Dunkin Donuts. 28 AGRIFOOD MAGAZINE – February/March 2011 Mixed kettle of financiers Navis Asia Fund VI closed at USD 1.2 billion in September 2010. The “We only invest in companies previous fund, Navis V, raised USD 1 billion in 2007. where there is basis for some Capital came from a mix of growth and where we think existing investors as well as new we can be helpful.” – Richard institutions and global consultants based in Asia (31% of capital Foyston, Chairman of Navis commitments), Europe (31%), Capital Partners. North America (29%) and other regions including the Middle East (9%). Managing partner Rodney Muse “We’ll be providing Golden Foods oil sector, Malaysia does not get that estimates some 60% of the new with capital for growth.” much attention from policy makers. fund will be focused on Southeast As economies develop the Asia while the remainder will Impressive returns agriculture sector becomes a smaller be spread across markets such Navis targets between 20-25% part of the economy. Nevertheless as Australia, India and Greater return on their money. “That’s what the world population is growing and China. He added that they will be we tell our investors. For the most food production too must increase. consistent in their USD 50 million part we have achieved that. For the Mr Foyston feels it’s risky not to pay to USD 100 million deal size. first fund it was higher, around the attention to food production. Since Fund II, Navis has also mid-30s. A lot depends on timing as “With arable land shrinking, R&D been offering a syariah-compliant well. These investments last quite in food production must grow. parallel fund where a portion of a long time so we don’t know what Emphasis should be paid to genetic its fund is reserved for halal-only kind of returns we are getting until improvement of crops and livestock. investments. it’s fully invested managed and At the same time strong government “We don’t invest in prohibited divested. This could take between regulation is important,” he said. industries anyway. About 90% eight and 10 years.” A well-regulated agriculture sector of our investments are syariah- Navis generally take about three is important to maintain quality compliant,” said Mr Foyston. years to invest. They hold their control. Companies and countries The non-compliant investments investment for about four years and can’t afford a food scare which do not make it into the syariah then divest over three years. will impact negatively on their portion of the fund. To build value, Navis’ strategy is to reputation, he added. “There was a case in Asia where generate top as well as bottom line Agriculture is successful in the restaurant business was growth involving capacity building, Thailand because of its well- compliant but it wasn’t in Australia expansion to new markets and developed group of independent because it served pork products.” upgrading operations. farmers. Fund VI has already made its first Mr Foyston uses Bangkok Ranch “They are used as contract farmers investment in a color cosmetics as an example. When Navis first for poultry companies or to grow and skincare company called acquired the company it only sold specific crops. They are dependable Alliance Cosmetic Group which has frozen uncooked duck. Now none of and deliver the raw material to operations in Malaysia, Singapore, its exports are uncooked. They are all processing operations on time,” he Brunei and Indonesia. processed in some way. said. Navis also led a consortium “We often bring the potential In Malaysia and Indonesia, Mr that bid for the Malaysian, Thai for a portfolio company to grow Foyston sees less of this. Instead and Singaporean assets of French outside its domestic market. At large companies lead the plantation retailer Carrefour. the same time, we add on financial sector. Navis has also entered public sophistication,” said Mr Foyston. “In Malaysia there are the small equities investing with the launch “Some companies may have scale farmers in Felda but their of the Navigator Asia Fund in 2005. big accounts with customers that standards of productivity are much are not profitable. We review and lower, their role in the food chain is monitor our investments closely and much smaller,” he said. society wants organically-grown that way our operations are quite Attention should be paid to food. labor intensive,” he said. another growing sector – the He feels there should be better For food and agribusiness Navis organic food industry. People are not regulatory oversight of the industry still has its eye on Thailand where only eating more but with growing including a clearer definition of the industry is recognized as an affluence and knowledge, they are what entails organic food to the important sector. Besides the palm eating better. A certain segment of certification process. n AGRIFOOD MAGAZINE – February/March 2011 29
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