* Target size bigger than 3rd, $2.8 bln fund - sources
* Eyes Southeast Asia, resource-rich Indonesia - sources
* Cool on China where deal valuation remains high - sources (Adds details about existing fund, competitors)
By George Chen, Asia Private Equity Correspondent
HONG KONG, Feb 8 (Reuters) - Affinity Equity Partners, an Asia-focused private equity firm founded by former top UBS UBSN.VX bankers, plans to raise a new multi-billion-dollar buyout fund to tap more deals in the fast-growing region, sources said.
The firm, founded in 2002 by K.Y. Tang, former chairman of UBS Capital, Asia Pacific, aimed to exceed the size of its most recent fund — Affinity Asia Pacific Fund III LP at $2.8 billion — for the new fund, the sources told Reuters on Monday.
Major institutional investors, also known as limited partners (LPs), in Affinity had been briefed on the plans, although formal fundraising roadshows would start in the second half, said the sources, who are from the private equity industry and are familiar with the plan.
Affinity’s LPs include many U.S. and European pension funds, including California Public Employees’ Retirement System, also known as CalPERS, the biggest U.S. pension fund.
The sources declined to be identified as the fundraising plan is private and confidential. Affinity was not immediately available for comment.
Affinity closed its third buyout fund, the $2.8 billion Affinity Asia Pacific Fund III LP, in 2007 and more than half of the capital had been invested, one of the sources said.
Affinity was initially branded as a South Korea-focused investment firm due party to Tang and his team’s long-time dealmaking experience and good connections in Asia’s No.4 economy.
In 2009, Affinity joined hands with U.S. buyout giant Kohlberg Kravis Roberts & Co (KKR) [KKR.UL] for the $1.8 billion acquisition of Korea’s Oriental Brewery from Anheuser-Busch InBev (ABI.BR), Asia’s biggest private equity deal last year.
In South Korea, Affinity’s main rivals include MBK Partners, whose co-founders are former senior Carlyle [CYL.UL] dealmakers in Asia.
In China, Affinity competes with funds like CITIC Capital, which announced on Monday it completed raising $925 million for its second China-dedicated buyout fund. [ID:nTOE61702E]
In late 2009, Affinity closed a $200 million buyout deal with a Beijing-based component manufacturer, making it the second and biggest investment for Affinity in China, where, the sources said, the fund would be more conservative and cautious as deal valuations may be too high to be competitive.
Affinity’s fourth fund in the making would focus more on new markets in Southeast Asia, like resource-rich Indonesia, the sources said.
In late 2009, Affinity opened an office in Jakarta and hired Inghie Kwik as its country head. Kwik, a well-connected local dealmaker, worked for Morgan Stanley (MS.N) as head of its investment banking business in Indonesia.
Blackstone Group (BX.N) and CVC Partners [CVC.UL] remain active in Indonesia, whose resources and infrastructure projects are also attracting interest from Asian sovereign wealth funds such as the $300 billion China Investment Corp [CIC.UL].
Besides Jakarta, Affinity also operates offices in Hong Kong, which is its headoffice, Seoul, Tokyo, Singapore and Sydney. In Australia, the fund aims to sell its portfolio company, Loscam, a pallet maker, for more than $433 million. [ID:nSGE61700L]
For related Asian private equity news, Reuters 3000 Xtra users can double click on: [LEN-RTRS-ASIA-PVE] (Editing by Muralikumar Anantharaman)