Navis plans to launch new USD 1.3bn fund with exits and private credit fund in works

Breaking News 5 October

Navis plans to launch new USD 1.3bn fund with exits and private credit fund in works

  • Fundraising for Navis IX to kick-off in 1Q24
  • Working on more than 10 exits
  • New private credit fund set to reach first close early next year

Navis Capital Partners, the Malaysia-headquartered private equity (PE) firm, is preparing to launch the Navis IX buyout fund this quarter, aiming to raise up to USD 1.3bn despite a tough fundraising environment, co-founder and Co-Managing Partner Rodney Muse told Mergermarket.

Navis IX, which will be the PE group’s latest flagship buyout fund, will be “definitely launched” verbally in 4Q23 and then will kick off raising in 1Q24, targeting between USD 1bn and USD 1.3bn, said Muse.

Navis has not started soft-sounding out investors just yet, although the firm is constantly in touch with limited partners (LPs) to update them on what “we’re doing and the amount of undrawn capital we still have available that gives us the kind of runway to launch and raise the next fund”, he said.

The current environment is “very tough” for PE fundraising in Asia and globally due to higher interest rates and various geopolitical tensions in play, Muse noted. According to Bain & Company’s 2023 Asia Pacific Private Equity Report published in March, the total capital raised by Asia Pacific-focused funds tumbled 43%, year-on-year, to USD 105bn in 2022, and on average general partners needed more time to close new funds.

Against that backdrop, it is essential to work closely with LPs to “appropriately time the raising of additional capital”, said Muse.

The new fund will continue with Navis’ investment strategy, he said. Navis typically takes controlling stakes in well-established and mid-size companies, largely in Southeast Asia but also selectively in the markets of Hong Kong, China, Australia and New Zealand, making equity investments of between USD 30m and USD 150m. Its preferred sectors are healthcare, education, food and beverage, white goods companies, and industrial manufacturing.

Exit headaches

The exit environment for PE firms has been challenging too, Muse said.  

Navis has been reported to be selling New Zealand-based egg producer Mainland Poultry, Singapore-based restaurant group Imperial Treasure and Macau-based leather and sustainable materials supplier ISA TanTec, among others. Moelis & Co is helping Navis with the sale of Imperial Treasure, as reported by Mergermarket in June, while Luminis Partners has been hired to sell Mainland Poultry.

Of its portfolio companies, Mainland Poultry has the highest Likely to Exit (LTE) score of 72 out of 100, which Navis has invested in since October 2017. Mergermarket's LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.

Muse declined to comment on specific deals but said that Navis has “a number of exits underway”. In total, Navis has more than 10 companies it is looking to exit, five of which are expected to be finalized by the end of 1Q24, he said.

Navis does not typically push its portfolio companies to list. Rather, it looks to exit to a strategic investor operating in the same industry, or to another PE firm that might be prepared to take the business to its next growth phase. “We are only buying businesses that we believe will be of strategic relevance and interest to larger players in the same ecosystem or the same industry,” added Muse.

Private credit pivot

In addition to the upcoming Navis IX buyout fund, Navis is also setting up a separate private credit fund, which, according to Muse, would be “the most logical evolution of our firm”.

“This is in terms of having another possible financial solution for small to midsize businesses that are high growth and profitable but are looking for growth capital of a different form, and in particular, for companies that are not prepared to cede control,” he explained.

Navis was targeting a USD 350m inaugural credit fund to provide private lending to largely Southeast Asian companies, according to media reports late last year.

Muse said the credit fund is expected to reach its first close of between USD 100m and USD 200m in early 2024, with investors including Navis’s existing relationships built over the past 25 years, such as insurance firms, pension funds and some family offices.

Navis’ PE and private credit businesses are “synergetic”, Muse said, noting that once Navis establishes a lending relationship with target companies and their founders, it can convert that into an eventual PE buyout opportunity once the founders are ready to cede their controlling stakes. Even before the first close, Navis has identified some lending opportunities for the credit fund, he said, without elaborating.

In July 2022, Navis brought in Justin Ferrier as Managing Partner of the new Asia credit platform from BlackRock, where Ferrier had worked in the private credit investment committee since 2016.

In September 2023, the firm hired Jack Ng and Nicholas Nugroho to its Asia credit team as directors. Ng is based in Singapore, while Nugroho will open Navis’ new office in Jakarta in 1Q24, which will be the firm’s seventh office.

Opportunities ahead

Founded in 1998 by Muse, Richard Foyston (Chairman) and Nicholas Bloy (Co-Managing Partner), Navis currently manages more than USD 5bn in private and public equity funds. It has completed more than 80 controlling PE investments to date, as well as more than 80 follow-on investments, according to its website.

Going forward, Navis is keen to look at industries that have shown resilience coming out of the COVID-19 pandemic, are not too aspirational in nature, and are either insulated or benefit from geopolitical tensions raging between China and the US or Russia and Ukraine, Muse said. He describes “too aspirational” as industries that are tailored mainly for the rich or ultra-wealthy, like fine watch retailers.

The firm will continue to be interested in targets in the education sector, follow-on acquisition opportunities in the food industry, and will be a bit more opportunistic when it comes to buyouts in the manufacturing or business services sectors, he said.

As previously announced, Navis closed its eighth fund in July 2021 at USD 900m. Since then, it has invested in companies like Dan-D Foods Group, S-Spine and Nerve Hospital, Eton Solutions, Ambassador Education Group and Software Combined. Among its most recent investments was Australia-based in-home care provider Caring Group, in which Navis acquired a majority stake for AUD 150m earlier this year, as reported by local media.

Simultaneous with closing its eighth fund, Navis sealed the USD 450m Navis Asia Green Loop Fund, a continuation fund to hold some portfolio companies from its sixth fund.

The firm’s 2022 exits include the sale of Adampak, a Singapore-based label and precision die-cut parts provider, to Oji Imaging Media, a subsidiary of Japanese paper products company Oji Holdings Corporation [TYO:3861]; B Medical Systems, a provider of sustainable medical cold chain solutions for storage and transportation, to Azenta, a leader in the cold chain industry, for an enterprise value of EUR 460m; and Torque Group International Fortune, a Hong Kong-headquartered structural components provider to the footwear industry, to Coats Group, an industrial thread maker.

Navis, with more than 100 employees, has generated USD 3bn of portfolio company revenues, as per its website.

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