Thadani makes sweet music with Symphony IPO

In a first for Asia, the veteran Indian private equity player lists his pan-Asian fund on the London Stock Exchange.
In a remarkable development, veteran Indian private equity player Anil Thadani has listed his private equity fund, Symphony International, in London. The IPO raised $200 million through the issue of 190 million new shares, including $11 million invested by Thadani and his management team.

Turning to the equity markets for capital could be a shrewd move given the recent turmoil in the credit markets and the threat of higher future interest rates.

Following the capital raising, Symphony will be capitalised at $340 million, taking into account the $140 million the fund is already sitting on.

Merrill Lynch was sole bookrunner on the deal.

This is the first time that an Asian fund has followed the example of US funds, such as Blackstone which raised $4 billion through an IPO, and KKR which raised $1.15 billion. (Although KKR's share price has since dipped below its IPO price.)

Some 100 accounts, including pension funds from the UK, Switzerland and France, private banks, investment funds and sovereign wealth funds decided to participate in the Symphony deal, which involved shares being issued and sold at $1.

Normal company valuations did not apply, according one source. ôAnil showed his 20-year track record in doing deals in Asia, his internal rate of return of 30% and his plans for the future. Investors bought into the deal, despite horrible conditions.ö

Symphony International is a pan-Asian fund aimed at Asian consumption plays. It targets hotels, healthcare, lifestyle and real estate projects.

The company has the Pizza Hut franchise for Thailand, for example, as well as major stakes in SingaporeÆs Parkview Hospital and Apollo Hospital in India. The fund has traded in and out (twice) of the hotel currently known as the Four Seasons Hotel, previously the Regent Hotel.

ôThe fund will be judged on its net asset value, that is, the sum of the performance of the companyÆs investments,ö says a source.

Normally, people desiring exposure to long-term, high value investment projects would become limited partners (LPs) in a private equity fund (providing the money to be managed by the general partners, who make the investment decisions).

However, according to one source, listing the fund has a number of advantages. ôAnil does not want to be circumscribed by the typical 5-7 year lifecycle of a fund. He would rather keep a great investment than be forced to sell it and return the funds to the LPs at the end of the fund cycle. In addition, once you sell the assets, you have to source new deals û but that will most likely be top of the market time, and hence undesirable. Finally, investors in the fund will benefit from much greater liquidity."

Another advantage to the structure is the remuneration. The management team will be incentivised, not by the traditional 20% carry interest, but by share options and the direct stake they acquired during the IPO. ôThis means the management has a tonne of skin in the game,ö says the source.

The fact that the totality of the company is listed means that there will be no conflict of interest. When a PE fund lists, it may be competing with several unlisted funds belonging to the same holding company. There is thus a conflict of interest as to how lucrative investments are shared out.

A further advantage of listing the fund is that the managers of the fund can keep excess funds in the bank and get some interest. Under a GP(general partner)-LP structure, the GPs have to return any uninvested funds.

After shooting up on Tuesday, the FTSE was down 1.6% by midday Wednesday. Symphony starts trading on the LSE next week.
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