Private equity deals set for big boom in and around Mideast

Private equity deals set for big boom in and around Mideast
http://archive.gulfnews.com/articles/08/03/04/10194638.html

03/04/2008 07:19 PM | By Babu Das Augustine, Banking Editor

Dubai: The Middle East North Africa and South Asia (MENASA) region is set for a big boom in private equity deals this year and the next few years, according to leaders of private equity industry in the region.

Speaking ahead of the Fourth Private Equity International Middle East Conference to be held in Dubai on Tuesday and Wednesday industry representatives said the region is fast emerging as a hot target for private equity investors from across the world as the regional private equity sector is becoming a part of the mature emerging market private equity industry.

Dubai International Capital, the private equity arm of Dubai Holding has about 10 per cent of its total assets under its management invested in the region. The company expects this share to increase substantially during the next few years.

New horizon

"The regional governments are keen to privatise, private family businesses are becoming more open to private equity participation and international private equity firms and professionals are seeing the region as an important investment destination. We see huge opportunities in the horizon and are ready to utilise them," said Sameer Al Ansari, executive chairman and chief executive of Dubai International Capital.

International speakers attending the conference said Middle East is fast maturing as a fundamentally strong market.

"Last year private equity firms across emerging markets raised $59 billion. Out of this about 10 per cent was from the Middle East. Within the region Gulf States are becoming a very important source of capital," said Sarah Alexander, founding president of the Emerging Market Private Equity Association.

The huge infrastructure developments underway in the region combined with the transition of family owned private enterprises are expected be a catalyst in the growth of private equity in the region, according to Arif Naqvi, Vice Chairman and Group Chief Executive Officer, Abraaj Capital.

"We see the boom for at least 10 years ahead. Even if the oil prices are to tumble by 50 per cent from the current level, the region will be still left with trillions of dollars in surplus to support the infrastructure development and the economic growth," said Naqvi.

The economic boom in the region, according to private equity industry players has increased the acceptability of the industry in the region.

"There is a huge funding gap in the region. While the banks have been typically into name lending and asset lending, the region lacks equity funding in the form of Angel funds, venture capital or private equity. What we see is just the beginning of a big trend," said Ansari.

Sovereign funds

While the big international private equity players have just started to make acquisitions here, experts said sovereign wealth funds would follow these funds into the region.

"Sovereign funds which have emerged big source of capital will soon turn their focus on assets closer home," said Howard S. Marks, chairman of Oaktree Capital.

Keeping up with the growth, the regional private equity industry witnessed substantial growth in fund raising activity.

According to latest figures from Abraaj Capital, PE firms raised a cumulative $22.8 billion from 2002 to 2007 with six firms accounting for 50 per cent of the fund raising activity in the region.

Leading private equity players in the region said yesterday that the international credit crunch would not affect the regional firms or deals.

"It is a fact that firms will have to accept some amount of widening credit spreads. However, availability of funds will be abundant because of the bulging regional liquidity and funds from the developed world looking for emerging opportunities," said Naqvi.

Acquisition: Abraaj buys 40% of Bosicor

Abraaj Capital, a leading regional private equity firm focused on Middle East, North Africa and South Asia (MENASA) announced yesterday that it has acquired a 40 per cent stake in the holding company of Bosicor Group (Bosicor), one of Pakistan's leading integrated oil companies.

The private equity deal provides Abraaj with 40 per cent shareholding in Bosicor's two group companies: Bosicor Oil Pakistan Limited and Bosicor Chemical Pakistan Limited. Abraaj will also acquire a minority stake in Bosicor Pakistan Limited (BPL.

The group's subsidiary, BPL, currently operates the fifth-largest oil refinery in Pakistan, with a rated capacity of 30,000 barrels per day (bpd) and a market share of 12 per cent. Established in 1995, BPL is listed on all three stock exchanges in the country. The investment in Bosicor was made through Abraaj Capital's $2 billion Infrastructure and Growth Capital Fund (IGCF).

The investment will fund the establishment of a petrochemical plant and a refining unit that will provide the Bosicor Group with an initial aggregate refining capacity of 145,000 bpd and create an integrated platform that operates across the full value chain in the oil sector.

"This investment in the future of Pakistan - one of many made by Abraaj Capital and the first by IGCF - will greatly enhance the country's ability to fuel its ongoing economic expansion," said Arif Naqvi, Vice Chairman and Group Chief Executive Officer, Abraaj Capital.