Dec 8, 2015

TPG Capital invests in Myanmar's top spirits maker

Global private equity firm TPG Capital has taken a 50 percent stake in one of Myanmar's leading spirits makers amid soaring expectations for a consumer boom in the frontier economy.

First reported by the Wall Street Journal on Monday, TPG confirmed the news in a press release later in the day.

The into Myanmar Distillery Company (MDC), which produces and sells popular whisky brand Grand Royal, will see former Diageo chief executive Paul Walsh join MDC's board as co-chairman and a representative of the TPG investment vehicle. The deal amount was not disclosed.

Monday's news marked TPG's second acquisition in Myanmar within a year.

Formerly known as Texas Pacific Group, the company injected $40 million into telecommunications venture Apollo Towers in the first quarter of 2014, which was one of the first big forays by a heavyweight U.S. private-equity firm since Myanmar first opened up its economy after decades of military rule.

"This investment marks an exciting addition to our growing Southeast Asia portfolio," said Ganen Sarvananthan, TPG's partner and managing director, in Monday's release.

"The investments we have made across Southeast Asia in the last two years, including 8990, PropertyGuru and Apollo Towers, underscore our strategy of identifying and partnering with businesses and founders that are well-positioned to capitalize on key trends within their industries and markets."

As a leading consumer products business, MDC is indeed reflective of an increasing wealthy middle-class thirsty for luxuries. With annual incomes of $1,046 to $4,125, the World Bank upgraded Myanmar to a lower-middle income country from a low-income country in October.

Being a predominantly Buddhist country, alcohol consumption remains small but the sector seems to be heating up. Earlier this year, Kirin Holdings acquired 55 percent of shares in Myanmar Brewery from Fraser and Neave for $560 million. The brewery commands around 80 percent of the local beer market.

The Ministry of Finance increased taxes on alcoholic beverages from 50 percent to 60 percent in April but local media reports still say alcohol production could hit a record this fiscal year, citing data from the National Planning and Economic Development Ministry.

TPG's announcement is the latest piece of news in a wave of optimism engulfing the Southeast Asian nation.

Following a landmark election last month that saw the opposition National League for Democracy (NLD) party sweep to power, the country is due to unveil its first stock exchange this week, which experts say reflects Yangon's commitment to economic liberalization.

Source: CNBC