UPDATE 1-CVC explores $2 bln-plus sale of Indonesia's Matahari stores

* No formal process has started yet -sources

* CVC bought Matahari in 2010 at $790 mln

* CVC plans new $3 bln Asia fund in 2013 -source

(Adds background, details) By Stephen Aldred and Janeman Latul

HONG KONG/JAKARTA, Oct 5 (Reuters) - CVC Partners is exploring the sale of Indonesia's PT Matahari Department Store , sources told Reuters, seeking a price tag of more than $2 billion after paying less than half that for the company two-and-a-half years ago.

Sources with direct knowledge of the matter said CVC is in early discussions with investment banks about selling the company, although no formal process has begun.

A successful sale of fast-growing Matahari, Indonesia's biggest department store chain, would likely allow CVC to earn a strong investment return ahead of an expected fundraising push for its next Asia fund, the sources said.

It would also be a boost for the London-based buyout firm as it faces a heavy loss on its investment in Australia's Nine Entertainment.

CVC declined to comment on its plans for an exit from Matahari. Matahari did not return a call seeking comment.

The sources declined to be identified as the discussions were private.

CVC, with investments that include Formula One and theme parks group Merlins Entertainment, has struggled with some of its other Asian portfolio companies.

Its biggest headache in Asia is its tie-up with Nine Entertainment, a struggling media company on which it faces a cash loss of A$1.8 billion ($1.84 billion), the biggest ever equity wipe-out for an Asia buyout deal.

It recently sold its stake in Singapore mechanical fasteners maker Infastech after a little more than two years. While a typical private equity investment extends for three to five years, buyout firms often seek an early exit if they are able to make money quickly, or if they are reaching the end of a fund cycle and need to return money to investors.


CVC bought a 98 percent stake in Matahari in early 2010 for $790 million, tying up with local investment vehicle Matahari Putra Prima Tbk (MPP) in what is still the nation's biggest ever private equity buyout.

The private equity firm is raising a 10 billion euro ($13 billion) fund in Europe and is expected to follow that with a fund of $3 billion for Asia, according to a source with direct knowedlge of the matter, well below the $4.2 billion it raised for its last Asia fund in 2008.

A CVC selldown of Matahari would also be a test case for private equity firms wanting to cash out of Indonesia, which in recent years has seen a rush of private equity inflows.

"The discussion is alive and it would be a big deal and we expect the deal to launch in the first half of 2013," one source with knowledge of the process said, adding that CVC is looking for a valuation of more than $2 billion.

Matahari, which operates more than 100 stores across Indonesia, has an $823 million market value, but with almost 99 percent of the company's shares held by CVC and its partner MPP, there is very little trading in the stock.

CVC's investment appears to have energised Matahari's performance, with its EBITDA (earnings before interest, tax, depreciation and amortisation) margin improving to nearly 30 percent in 2011 - double the industry average and up from 23.3 percent in 2007, according to Thomson Reuters data.

EBITDA at Matahari grew 39 percent over the last 12 months to 1.4 trillion Indonesian rupiah ($146 million), the data showed.

CVC was among the early global private equity firms to move into Southeast Asia.

Much of that early deal-making was the work of Sigit Prasetya, a smartly dressed math wizard whose success has made him a target hire for rival private equity funds looking to expand into Southeast Asia's booming consumer markets.

Prasetya was behind CVC's Matahari investment and was made a managing partner at the firm in January of this year.

(Additional reporting by Denny Thomas; Editing by Michael Flaherty and Edmund Klamann)

((denny.thomas@thomsonreuters.com)(+852 2843 6358)(Reuters Messaging: denny.thomas.reuters.com@reuters.net))