By Julian Matthews
August 14, 2000
ICG Bolsters Asian B2B Beachhead, Newsbytes
Nasdaq-listed Internet Capital Group plans to spend US$64 million on three maiden acquisitions in Asia through its Asian investment arm ICG AsiaWorks Ltd.
ICG AsiaWorks will provide or arrange to provide up to $25 million to set up an Asian joint venture with US-based e-business systems provider Breakaway Solutions Inc, tentatively called Breakaway Solutions Asia-Pacific.
It will also subscribe to shares and warrants for about $19 million for Singapore-based Internet-enabled logistics provider AceFusion.com Pte Ltd.
Its third investment is a plan to double its stake in consumer goods portal operator MegaVillage.com Holdings Limited from the $10 million forked out in July. ICG Asiaworks will issue 55 million new shares at HK$1.475 ($0.19) per share, to swap for MegaVillage's shares. The company has already shelled out $5 million for MegaVillage, while the remaining half will be payable on the satisfaction of certain operating milestones.
The deals are subject to Hong Kong Stock Exchange (HKSE) regulatory approval. They also come on the back of disclosure Wednesday that ICG chalked up losses of HK$1 billion ($128.21 million) for the first half of the year.
The loss was attributed to a provision of HK$1.02 billion ($130.76 million) for its inherited toy and property businesses from Harbour Ring International Holdings. The company announced that no further provision will be required and it still had HK$1.4 billion ($179.48 million) in cash to invest in start-ups.
In May, ICG AsiaWorks partnered with Li Ka-shing's Hong Kong conglomerate Hutchison Whampoa Ltd for a backdoor listing on the HKSE via Harbour Ring.
ICG AsiaWorks CEO Victor Hwang told Newsbytes he could not disclose the exact figures in the new deals but that "generally we take significant stakes in our partner companies."
"We believe that the precise amount invested in each company is not as important as the opportunity we can realize by working closely with the management of our partner companies," he said. He added that senior members of ICG AsiaWorks are expected to be represented on the board of the three partner companies.
Hwang, who is also deputy chairman of ICG AsiaWorks, said in a statement last week that the new deals were just part of a mission to build between five to ten major companies in Asia in the B2B space.
"B2B in Asia is in its early stages of growth. There is no better time for us to be building for the future than now. Our aim is to build great companies able to play a major part in an exciting new era," he said.
He estimates the B2B market in Asia to grow to between $400 billion and $700 billion in the next four years.
ICG AsiaWorks will mirror its Wayne, Pennsylvania-based parent company's strategy to acquire and hold significant stakes in B2B companies for the long term. It will also provide the exclusive platform for the 70 over companies it has taken stakes in the US to expand into Asia.
Hwang said that unlike traditional venture capital companies with solely an investment focus, ICG brings additional operational resources to actively assist partner companies. "We look far beyond the IPO to build large, successful companies over the long term," he said.
ICG divides its portfolio of B2B companies in two: enabling service providers and market makers. Enabling service providers are described as companies that provide a set of products, services and technologies that facilitate B2B e-commerce, while market makers are companies that bring buyers and sellers together in e-marketplaces for a particular sector or industry.
Hwang explained all three new partners offer "a strong strategic fit" for ICG AsiaWorks' focus on core horizontal B2B enablers and service providers.
"We are also demonstrating our ability to bring US' software and market making solutions for B2B e-commerce to key Asian companies."
Hwang said that Breakaway Solutions Asia Pacific, like its Nasdaq-listed counterpart Breakaway Solutions, will offer integrated strategic consulting, systems integration services and application hosting services for growing Asian companies.
"Breakaway's products are well-suited for the Asian market where there are many small and medium enterprises. The company already has set up more than 50 digital exchanges, six solution centers and 11 hosting centers across the world and it is still growing. Its 125 B2B clients includes public-listed companies such as Dell, VerticalNet and Onvia," he said.
Hwang said AceFusion.com has a suite of Internet-enabled logistics systems, via its portal FusionHub.com, which integrates warehousing, air and sea freight and land transport to provide businesses worldwide with a seamless fulfillment infrastructure.
"AceFusion.com is a first mover when it comes to providing management solutions for integrated localized logistics. It has an exceptionally strong management team and is operating in a market - the supply chain management industry - with an estimated size of $8 billion," he said.
AceFusion.com already has partnered with major players such as Fuji Xerox, IBM/Lotus, Oracle and Sun Microsystems in the region.
MegaVillage.com addresses the light consumer goods marketplace, including watches, handbags, women's shoes and eyewear. "MegaVillage introduces substantial efficiency improvements in the supply chain for these product categories, and connects low cost, high volume manufacturing capacity in South China with global demand for these products. We believe the opportunity is huge as this industry is one of the key drivers of Asia's economic growth," said Hwang.
ICG AsiaWorks also announced the appointment of Rowena Chu as chief financial officer. She was formerly the head of Technology Equity Capital Markets for Asia of Merrill Lynch Hong Kong.
Exchange Rate: $1 = HK$7.80