11 September 2012

Billionaires Bet on Palm Oil With GIC, Northstar: Southeast Asia

 Triputra Agro Persada, the palm oil company owned by Indonesian billionaires Theodore Rachmat and Benny Subianto, will increase its planted area by two-thirds by 2015 as it prepares for an initial stock sale.
Triputra Agro Persada has been buying plantations since it was set up in 2005 and currently owns about 300,000 hectares (740,000 acres), Chief Executive Officer Arif Rachmat said in an interview in Jakarta Sept. 7. It plans to increase its planted areas to at least 200,000 hectares from more than 120,000 hectares with the help of funding from TPG Capital’s Indonesian partner, Northstar, and Government of Singapore Investment Corp.
Triputra Agro Persada CEO Arif  Rachmat
Arif Rachmat, chief executive officer of Triputra Agro Persada. Source: Triputra Agro Persada via Bloomberg
Triputra Agro Persada Commisioner Toddy Sugoto
Toddy Sugoto, commissioner of Triputra Agro Persada. Source: Triputra Agro Persada via Bloomberg
An initial public offering is planned for in three to five years, Rachmat said. “We will do it at the most optimum time. It’s hard to say where commodity prices will be.”
TPG’s Indonesian partner, Northstar, and the Singaporesovereign wealth fund invested $200 million for a “small minority stake” in Triputra Agro Persada in August and have the option of investing an additional $50 million in the next few months, the 37-year-old son of Theodore Rachmat said. That’s the biggest private-equity investment in Southeast Asia’s largest economy this year, according to data compiled by Bloomberg.
The benchmark palm oil price in Malaysia, the second- largest producer, has dropped 7.5 percent this year through Sept. 10 as a slowdown in China and Europe cut consumption. Global demand for the tropical commodity used in everything from candy to lipstick, is set to “grow strongly” because of its increasing use in bio-diesel and electricity production, according to a report by PricewaterhouseCoopers LLP this year.

‘Quite Comfortable’

“We are optimistic about the industry,” Rachmat said. “It is not only driven by demand for food in countries such as India, China and Indonesia, but also demand for bio-fuel.”
The company is “still quite comfortable” with the price of palm oil because of record soybean prices, which have increased the cost of a rival edible oil that’s crushed from the beans, he said. The worst U.S. drought in half a century has hurt soybean crop yields.
“Indonesia has not yet exploited its full potential as far as palm oil production is concerned,” saidFauzi Ichsan, a senior economist at Standard Chartered Plc in Jakarta. “If you believe in the next five to 10 years global commodity prices will rise further, you have to invest in Indonesia even though there’s been a correction in the past year.”
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