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LVMH-backed private equity firm closes US$1.45b Asia fund

[SINGAPORE] L Catterton, the US$15 billion private equity firm co-founded by luxury-goods maker LVMH Moet Hennessy Louis Vuitton SE, has closed its third Asia fund to back more retail and healthcare companies across the region.

L Catterton Asia 3 had a target of US$1.25 billion, but remained open after additional investors expressed interest, according to managing partner Chinta Bhagat. The fund eventually raised just under US$1.45 billion, with less than half deployed.

Its establishment comes despite challenges for consumer brands amid trade war concerns and slowing economic growth in China. L Catterton is betting that growing demand for improved medical and retail experiences among Asia's affluent will help offset these pressures.

"I don't think countries - I think cities," Mr Bhagat said in his first interview since joining the firm. "About 50 per cent to 60 per cent of the GDP (gross domestic product) that matters for a business like ours rests in first tier cities, and they've become enormous, with between 10 to 20 million people."

Mr Bhagat joined L Catterton in August from Malaysia's Khazanah Nasional Bhd, estimated by the Sovereign Wealth Fund Institute to have US$37 billion in assets under management. He leads L Catterton's Asia platform with co-managing partner Ravi Thakran.

China, South-east Asia

L Catterton Asia 3 will run for 10 years and seek deals across China, Japan, India, South-east Asia, Australia and New Zealand. While the company's stated average ticket size in Asia is between US$50 million and US$150 million, Mr Bhagat said the size of the latest fund means it will largely focus on transactions north of US$100 million.

Examples of investments could be a chain of dental clinics that also offer cosmetic services, he said.

But L Catterton will also play to its strengths by helping retail brands grow. Its staff have experience in picking store locations and finding partners - vital when trying to beat off bigger rivals offering richer valuations, like SoftBank Group Corp's Vision Fund.

L Catterton's first Asia fund is on track to deliver a return of around 2 to 2.5 times, Mr Bhagat said.

"The simplest way to think of the strategy is anything you can build a consumer brand around," he said. "If you came to me and said'‘Here's the Ikea of Asia', just as an example, would we look at it? Of course we would because it fits the capability side for our ability to add value and make money."

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