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Industry: Private Equity
Type: Business and industry issue
Date: 12/8/2011

Capitalizing on growth: Australia

Australia may be the world’s second most developed country,¹ but economically it is more closely tied to Asia, particularly China, than the West. With a 30-year track record and highly developed financial advisory, legal and regulatory environment, Australia’s US$5 billion private equity industry offers a relatively safe investment environment with excellent indirect exposure to the Asian growth story. Investments in shipping pallet provider Loscam and private education provider Study Group are excellent examples of how significant returns can be made from Australian companies with an Asia angle.

Study Group

Developing Asia has a thirst for quality private education, with institutions in the U.S., Europe and Australia among the most desirable. In September 2006 CHAMP Private Equity bought Study Group, a leading provider of higher education for international students, from DMG International for US$180m.² At the time, Study Group had 35,000 students at 23 centers in Australia, the UK, U.S., New Zealand and Canada.³

CHAMP invested in the business and backed management to open new facilities, including 17 international study centers which saw an increase in student numbers to 55,000.⁴ Two add-on acquisitions were also completed. Over the next four years profits tripled and in 2010 CHAMP explored exit options, including an IPO, before the business was sold to Providence Equity Partners for US$673m.⁵ CHAMP investors benefited from a developed market from an operational and governance perspective and exposure to fast growing markets in Asia. CHAMP’s investment in Study Group resulted in an IRR of over 55 percent and a five times return of capital invested.

Loscam

The development of Loscam into a regional leader in the returnable pallet and packaging distribution business shows how returns can be generated by directly tapping into Asian markets.

Affinity Equity Partners bought Loscam from DB Capital Partners for about US$255m in August 2005, when the company had a 25–30 percent market share in Australia⁶. The growth strategy was to work with global consumer goods groups, including Proctor & Gamble, Unilever, Nestle and Colgate⁷ and retailers, including Tesco, Big C, Makro, Carrefour, Park’n Shop, Wellcome and Matahari, to create new markets across Asia. Loscam now has operations in China, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

In June 2010 Loscam was bought by China Merchants Group (CMG) of Hong Kong, the world’s largest shipping container manufacturer, for US$612m⁸. CMG’s offer was preferred to a tertiary sale to PE and an IPO.⁹

¹UN World Development Index 2010

²CHAMP Press Release, September 2006 (using current exchange rates)

³CHAMP Press Release, September 2006 (using current exchange rates)

⁴Study Group.com, October 2011

⁵Study Group.com, October 2011

⁶Financial Times, 28 January 2010 (using current exhange rates)

⁷Pallet Enterprise, January 2007

⁸Reuters, June 4, 2010 (using current exchange rates)

⁹Reuters, June 4, 2010 (using current exchange rates)

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