Indonesia Revives Merger and Acquisition Deal Flow

State-owned cement producer Semen Indonesia is raising $1.25 billion through a bridge loan for its proposed acquisition of the local business of LafargeHolcim, catapulting the country to the center of event-driven financing activity in Asia.

BNP Paribas, Deutsche Bank, Maybank, MUFG and Standard Chartered have underwritten the two-year dual-tranche loan. One tranche will fund the purchase of Switzerland-based LafargeHolcim’s 80.6 percent stake in Holcim Indonesia and the other a mandatory tender offer for the remainder.

The borrowing is Semen Indonesia’s first outing in the offshore loan markets in two years and the second sizeable merger and acquisition financing from the country this month. State-owned miner Indonesia Asahan Aluminium (Inalum) mandated seven banks on a $2.85 billion 18-month bridge loan that partially backed the purchase of a controlling stake in Freeport-McMoran’s local unit.

That loan was canceled last week after Inalum completed a bigger-than-expected bond. Southeast Asia’s largest economy has emerged as an unlikely source of big-ticket merger and acquisition financings in recent weeks after being dormant for the first nine months of the year.

“Indonesia is not a typical M&A financing market as its corporates have not indulged much in big acquisition previously. However, in the past couple of months companies such as Inalum and Semen Indonesia have presented lenders the chance to support their takeover activity,” one senior loans banker in Hong Kong said.

The two financings add variety to a segment that has struggled this year in Asia after China imposed curbs on capital outflows in the second half of 2016, which, combined with rising geopolitical tensions, dried up deal flow from China.

Event-driven financings from Asia (excluding Japan) fell 36 percent to $22.77 billion in the first nine months of the year, compared with the corresponding period a year earlier, according to LPC data. Hong Kong and China accounted for $12.87 billion of merger and acquisition loans in the first three quarters – more than half the Asia (ex-Japan) tally.

In the current quarter, other markets such as Indonesia and India have emerged with large event-driven financings totaling slightly over $10 billion that should prop up the numbers in 2019.

Semen Indonesia is likely to complete syndication early next year, while US-based aluminum producer Novelis, the subsidiary of India’s Hindalco Industries and conglomerate Aditya Birla Group, is raising $2.275 billion in loans for its acquisition of rolled aluminum products supplier Aleris.

That adds to a couple of other loans for Indian companies currently in the market – a $3 billion five-year loan backing agrochemicals company UPL’s purchase of US-based Arysta LifeScience and a $1.1 billion loan for the buyout of London-listed Vedanta Resources, which is largely an Indian mining company.

The pipeline looks robust for Australia and Taiwan, with the latter poised to finish 2018 on a strong note. Both markets clocked $3.13 billion and $3.18 billion in merger and acquisition loans in the first three quarters of the year, keeping the till ringing with leveraged buyout loans during the year.

In Australia a sizeable loan is also in the works for private equity giant KKR’s proposed A$2.23 billion ($1.6 billion) offer for accounting software group MYOB. KKR is also in action in Taiwan, where it is raising a NT$31.2 billion ($1 billion) five-year loan to back its leveraged buyout of Taipei-listed specialty chemicals maker LCY Chemical.

And Chinese companies are slowly getting back onto the merger and acquisition bandwagon as well. Anta Sports, China’s biggest sportswear retailer by market value, is leading a Chinese consortium to acquire Finland’s Amer Sports and is looking at financing of up to €4 billion ($4.5 billion).

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