Morgan Stanley Private Equity and OSF Merchant Banking Form Strategic Partnership

March 28, 2012

São Paulo, March 28, 2012 – Morgan Stanley Private Equity announced today that it is forming a strategic partnership with OSF Merchant Banking to explore investment opportunities in Brazil.

Headquartered in São Paulo, OSF Merchant Banking advises international financial and strategic investors with substantial interests in Brazil. The firm was founded by private equity veterans Hans J. Apostel and Dr. Thomas Jetter, alongside distinguished operational partners such as Dr. Volker Trautz, former Chairman of LyondellBasell and former Board Member of BASF, who began his career in Brazil as President of BASF Brasileira. OSF Merchant Banking’s partners have led investments and divestments totaling over USD 10 billion.

"Brazil has entered a cycle of abundant opportunities with an unprecedented flow of capital in its history. The increasing presence of large foreign investment funds, combined with the growing capitalization of Brazilian financial institutions and family offices with ever-larger resources, makes the search for promising opportunities a somewhat challenging effort," comments Hans J. Apostel. "We are very pleased to work with the Morgan Stanley Private Equity team, which has been very successful in focusing on operational improvements rather than financial engineering. This is a highly effective approach, especially in Brazil, where investment returns cannot be based on financial arbitrage given the country's market conditions and cost of debt."

"OSF Merchant Banking and Morgan Stanley Private Equity will focus not only on companies with high growth potential but also on those with the possibility of achieving double-digit operational growth rates. This investment thesis requires significant involvement from our operational partners in executing our strategy," highlights Thomas Jetter. "Brazil has gained increasing importance in the allocation of major international funds, for whom private equity and emerging markets have become a priority."

"We are very excited and motivated to establish this partnership with OSF Merchant Banking and explore investment opportunities together," says Alan K. Jones, Global Head of Morgan Stanley Private Equity. "OSF Merchant Banking has assembled a unique team of talents with nearly 30 years of individual experience in both complex international private equity transactions and the management of global companies with a strong presence in the Brazilian market."

March 28, 2012 – 00:00 Morgan Stanley partners with OSF, founded by Apostel, to invest in private equity in Brazil

By Vinícius Pinheiro (Valor Econômico) | São Paulo

Morgan Stanley has partnered with the Brazilian firm OSF Merchant Banking for investments in private equity in Brazil. The agreement establishes that OSF Merchant Banking will identify investment opportunities in the Brazilian market and co-invest with the bank.

The investments will be made through the bank's global fund, which has USD 1.5 billion, but there is no specific investment target for the country. The focus will be on mid-sized companies with growth potential.

Morgan Stanley’s Brazilian partner comprises experienced executives such as Thomas Jetter, former partner at Permira, one of Europe's largest private equity firms. Hans Apostel, one of the founding partners of OSF Merchant Banking, was a pioneer in private equity investments in Brazil.

The German executive, who arrived in Brazil in the 1970s, played a key role in acquiring subsidiaries of companies that exited Brazil during the early Collor administration, including Mallory, which was then controlled by Black & Decker. Years later, with the return of foreign investments following the Real Plan, Apostel divested these holdings.

After spending most of the last decade conducting business in Europe, he decided to return to Brazil amid the growing interest of private equity firms in emerging markets. "After the crisis, leveraged buyouts became unfeasible, which had been the main investment strategy for funds abroad," he says.

Apostel acknowledges that he will not find the same opportunities in Brazil as in the 1990s. "We do not expect to buy cheap, but some of the deals closed by funds were made at excessively high multiples," he evaluates.

With little room for price arbitrage, OSF Merchant Banking expects to generate returns through operational improvements in the companies it invests in. The executive expects to announce the first deal with Morgan Stanley "in the coming months."

Morgan Stanley's private equity division has invested a total of USD 8 billion worldwide. In emerging markets, the firm has a strong presence in Asia, where it has invested nearly USD 2.5 billion, and is now expanding into new regions. Recently, the bank formed a similar partnership in Mexico, focused specifically on the energy sector. Source: Morgan Stanley Press Release