Information on the Target

Affinity Equity Partners ("Affinity"), a prominent Asian private equity firm, has successfully exited its remaining 17.1% stake in PT Industri Jamu dan Farmasi Sido Muncul Tbk ("Sido Muncul") by selling it to the controlling shareholder, the Hidayat family, for a total consideration of USD 233 million on April 5, 2024. This latest transaction follows an earlier block trade of 4.0% completed on April 1, 2022. Over their 6.5-year partnership, Affinity and the Hidayat family have achieved remarkable growth for Sido Muncul.

Founded in 1951, Sido Muncul stands as Indonesia's largest manufacturer and brand owner of herbal products and medicines, boasting an impressive 84% market share in the country's herbal products sector. The company has been publicly traded on the Indonesia Stock Exchange (IDX) since 2013 and employs over 4,000 staff, operating a diverse range of more than 300 products, including its renowned flagship item, Tolak Angin.

Industry Overview in Indonesia

The Indonesian herbal products industry has witnessed robust growth over recent years, supported by an increasing consumer awareness of health and wellness. With a rich tradition of herbal medicine rooted in Indonesian culture, the market is fueled by both domestic consumption and a growing interest in exports. The diverse range of locally sourced ingredients enhances the industry's potential for innovation and expansion into international markets.

Government initiatives promoting the utilization of traditional herbal remedies have further bolstered the industry, encouraging domestic production and the global export of Indonesian herbal products. As the government aligns with the growing demand for natural and organic products, the herbal sector is anticipated to thrive. This trend is compounded by rising consumer demand for sustainable and environmentally friendly practices.

In recent years, companies within this sector, like Sido Muncul, have increasingly adopted corporate social responsibility (CSR) initiatives and published sustainability reports. Such measures not only address regulatory requirements but also respond to the expectations of socially conscious consumers, thereby enhancing brand reputation and market share.

Lastly, the confluence of traditional practices and modern consumerism creates a promising outlook for future investments into the herbal products market in Indonesia. The increasing health consciousness among consumers is set to reshape market dynamics, driving manufacturers to innovate continually and enhance product offerings to capture emerging trends.

The Rationale Behind the Deal

The decision for Affinity to sell its stake in Sido Muncul aligns with its long-term strategy of maximizing returns for its investors. The partnership with the Hidayat family has been instrumental in scaling Sido Muncul’s operations, leading to improved market leadership in Indonesia's herbal medicines sector.

Affinity's active role in institutionalizing Sido Muncul's operations, refining its business strategy, and enhancing operational efficiencies has transformed the company into a modern consumer health entity ready for further growth. This favorable market position supported Affinity’s exit strategy and offers a compelling opportunity for the Hidayat family to take full control and continue expansion.

Information About the Investor

Affinity Equity Partners is recognized as one of the largest independent private equity firms across the Asia Pacific region, with a strong investment track record since its inception in 1998. The firm currently manages approximately USD 14 billion in assets and funds and focuses its investments mainly in East Asia, Australia, New Zealand, Southeast Asia, and Greater China.

With its current operations through Fund V, a USD 6.0 billion fund, Affinity aims to identify and support businesses with strong growth potential, using its extensive expertise and resources to drive operational improvements and facilitate market expansion. The firm’s collaborative approach with local partners exemplifies its commitment to nurturing businesses and achieving meaningful investments.

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In the context of this investment exit, Affinity’s decision to divest from Sido Muncul can be seen as a well-timed and strategic move. The firm has effectively realized the fruits of its labor over a sustained period while enabling the company to maintain its growth trajectory under the Hidayat family's guidance.

Moreover, Sido Muncul's strong position in the herbal products market within Indonesia and its commitment to sustainability positions it favorably for future success. As consumer preferences shift towards health-oriented and natural products, Sido Muncul is likely to maintain its industry-leading status, making it a potentially valuable investment for the Hidayat family.

The transaction signals the culmination of a successful partnership marked by significant milestones benefiting both investor and market dynamics. Affinity’s exit, accompanied by notable achievements in corporate governance, operational improvements, and sustainability, reflects a successful investment journey.

While the investment yielded positive results for Affinity, the ongoing growth potential for Sido Muncul underlines the possibility of further advancements in the industry. Maintaining a close partnership with the Hidayat family will be instrumental in ensuring Sido Muncul continues to push forward into new markets and innovations.

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