Added On: Wednesday, May 16, 2007

Rich, young, and spreading

AsiaViews, Edition: 16/IV/May/2007

Armed with billions of dollars, several young executives have continuously been hunting down “cheap” assets in Indonesia. They have the backing of world investment giants from the US, Europe and Asia.

THEY really are lucky: young, brilliant, extremely rich, even handsome. Having been educated at famous overseas universities and with work experience at some of the top financial institutions in the world, these young men are now ruling the roost in Indonesia.

They are young professionals less than 40 years of age who are now shining in the domestic investment business sector. Through fund investment management companies they have built up, billions of dollars from overseas—as well as from within Indonesia—have been pulled in for investing in this country.

The names of the most famous of these young professionals include: Sandiaga S. Uno, 38, Rosan P. Roeslani, 38, Tom Lembong, 36, and Patrick S. Walujo, 32. The investment sectors that they have targeted range from mining to banking and from retail business networks to cineplexes.
It all began when the economic and monetary crisis hit East and Southeast Asia in 1997. At that time, many good companies suddenly collapsed, buried under piles of debt caused by interest rates jumping up dramatically after the value of the rupiah fell, battered by the US dollar.
For many people, this crisis was by no means a small disaster. Business empires that had taken decades to build up were gone in a flash. However, for some people the crisis in fact created opportunities. This was their chance to hunt down good assets at extremely low prices. In short, they just had to wait a while to enjoy the harvest, while the years of hard work involved could only be seen from afar.

In order to be able to fund their activities, they set up alternative investment institutions, such as private equity funds and hedge funds. They obtained funds from international financial institutions as well as local ones. Hedge funds usually target short-term investments with a high level of liquidity, such as at the stock exchange, while private equity funds are usually more focused on long-term investments of between five and 19 years.

Armed with these investment funds, they then usually buy up bankrupt companies or those with distressed assets. These companies were then cleaned by a professional management team, to be sold off later once they were healthy and profitable again. In Indonesia, this is certainly a new type of business but this sort of business has already been going on for a long time now in America and Europe.

Opportunities such as these were seized by Sandiaga S. Uno. Together with veteran businessman Edwin Soeryadjaya, he set up PT Saratoga Capital in 1998. “At that time, my partner, Pak Edwin, believed that there certainly were many opportunities during the crisis,” remembered this CEO of Saratoga.

Recently, Sandiaga, together with his classmate from Pangudi Luhur Senior High School, Jakarta, Rosan P. Roeslani, also set up PT Recapital Advisors. These two were separated when they chose different directions for university study—Sandiaga went to George Washington University, USA, while Rosan went to Antwerp University, Belgium. However, their strong business instinct brought them together again.

During the crisis, another name that also arose was that of Hary Tanoesoedibjo. Under the flag of PT Bhakti Asset Management, this master of business administration graduate from Carlton University, Canada, then set up the Indonesia Recovery Company Limited together with Asia Debt Management.

He was targeting several companies in the coffers of the Indonesian Bank Restructuring Agency (IBRA) as well as assets under the Jakarta Initiative. In addition to being known to be close to global speculator George Soros, Hary was also often accused of being “entrusted” with the investment funds of some of Indonesia’s top business tycoons, including Salim.
However, recently Hary has become better known as the king of media. Under the flag of the Bimantara Group, which he acquired, several media are now in his hands; from private television stations to radio, and even print media.

After some time, new names have appeared. Take a look at Northstar Pacific, which is skippered by Patrick Walujo, son-in-law of a former CEO of Astra International, Theodore P. Rachmat. There is also Quvat Management Pte Ltd—better known in Indonesia as Principia Management Group—which is controlled by Tom Lembong.

Tom’s name is not a new one in investment circles. This former investment banker from Morgan Stanley (USA) was once head of the Investment Asset Management division at IBRA.
After that, together with a colleague from IBRA, he moved to FarIndo Investment Ltd, which succeeded in acquiring Bank Central Asia. However, then he and his colleague decided to “flee” from FarIndo and set up Principia (Quvat).


FOR investment managers, the ability to snare big names as “donors” is clearly an essential requirement if one wants business to fly high. Understandably, this is not a low-cost business. They needed hundreds of millions of US dollars in order to hunt down assets in Indonesia.
Because of this, behind them there were many big names with enormous amounts of money. These included global investment fund managers and financial institutions such as Texas Pacific Group, Citigroup, Goldman Sachs, Farallon Capital Group and the Government of Singapore Investment Corp.

There were also several wealthy foundations such as Duke University Endowment, Stanford University as well as the Bill Gates and Melinda Gates Foundation. “A return on investment of 20 percent per year was sufficiently interesting for them to invest here,” said Sandiaga, who graduated as an MBA from George Washington University.

According to one investment manager, in the beginning it was not easy to convince these fund owners to invest. This was understandable, bearing in mind that billions of US dollars were needed. Usually, fund owners investigate fund managers of investment funds through their schools, universities and their previous places of work. “Sometimes they even make us of the services of well-known detective agencies, such as Kroll Associates,” he said. It should be pointed out that the majority of these were new players.

After contracts had been signed, funds began to flow into the coffers of these investment companies. Armed with these global funds, they then competed in their fight over these “cheap” assets in Indonesia. The sales tenders of assets or debt claims at IBRA, which have now been transferred to PT Perusahaan Pengelola Aset (PPA—literally the Debt Management Company), were their most attractive bidding sites.

Several success stories were repeated. Bhakti, for example, succeeded in buying Salim Oleochemical from IBRA. While Recapital succeeded in winning the tender to finance the largest shrimp farm in Southeast Asia, PT Dipasena Citra Darmaja, as well as buying shares in Bank Tabungan Pensiunan Nasional (BTPN) from PPA.

Another nice story is that of the purchase of PT Adaro Indonesia, one of the largest coalmines in Indonesia, in 2005. For this transaction, they all joined up and worked a single consortium. Sandiaga, Patrick and Tom worked together, helped by Edwin Soeryadjaya and T.P. Rachmat, plus Erick Tohir, owner of the Mahaka Group. “In the Adaro transaction, we were all working together,” said Patrick, who used to work at Goldman Sachs.

But it was different in the BTPN transaction. During the process of purchasing this pension fund bank, Tom and Patrick apparently worked separately. Why did this happen? “Sometimes, competition cannot be avoided,” said Sandiaga. In addition, according to a Tempo source, “They have different styles.”

Despite the stories behind the infighting and competing against each other, the businesses of these young executives have begun to spread. Look at Saratoga, for example. Although it is less than 10 years old, this company’s business network has already spread into several sectors, including coal, oil & gas, mining, timber and plantations as well as infrastructure, such as telecommunications, toll roads and electricity. “The total amount of funds invested is now approaching US$ 1 billion (around Rp9 trillion),” said Rosan.

Northstar, which is only three years old, has also already succeeded in acquiring several companies. These include PT Alfa Retailindo Tbk (40 percent) and Alfa Mart (40 percent). Previously, these were both under the Sampoerna flag. Northstar also owns a liquid gas company as well as oil & gas fields in South Sumatra.

According to Patrick, investment funds currently managed amount to some US$100 million, or around Rp900 billion. As much as US$15 million of this originated from Texas Pacific Group, the giant investment institution from the US. “If we need more, we just need to ask,” he said.
What about Quvat Management? This company is said to have pocketed investment funds of US$150 million or around Rp1.35 trillion, in addition to its shares in Adaro, and is now investing in the entertainment business.

Since November last year, Quvat—reportedly in partnership with the Artha Graha Group—has positioned itself as a serious competitor to the Cineplex 21 network in the film entertainment business with the arrival of Blitz Megaplex Cinemas.

So, just like hawks, these young executives are continually looking at and are ready to pounce on any “dying” company. “Our business is in fact hunting down new opportunities,” said Patrick.
They have now prioritized several companies. Saratoga is currently keeping a close watch on the Newmont gold mine in West Nusa Tenggara. Close attention is also being paid to the largest airline in Indonesia, Garuda Indonesia, by Northstar together with the Texas Pacific Group.
And there’s still more. Apparently, the giant Cepu Block oil field in Bojonegoro, East Java, has not escaped their gaze. “There are those who currently covet the regional government’s shares in this oil field,” whispered one source.

If this is the case, then it would seem that the competition will become even more fierce.

By MD, Heri Susanto and Retno Sulistyowati
Tempo, No. 37/VII/15-22 May 2007



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