New PE funds and investment deals give the Middle East hope

Private equity firms revealed a flurry of new funds and investment deals this week, raising hopes that activity will pick up in the Middle East after the financial crisis stunted growth and raised the spectre of a string of closures because of poor returns.

Industry players ranging from Citadel Capital of Egypt to the Abu Dhabi companies The National Investor, Invest AD and National Bank of Abu Dhabi, are grasping at signs of a recovery in global and regional markets as they contemplate raising new money and selling off some of their stakes.

"I firmly believe we're just about to turn the corner and get into a rather interesting few years up ahead," Ammar Alkhudairy, the managing director of Amwal AlKhaleej in Saudi Arabia, said at a private equity conference in Abu Dhabi. "When it's darkest is when opportunities become manifest."

Private equity funds raise money from investors that they then use to purchase stakes in or take over private companies. They try to generate large returns by exiting their investments through share listings or sales to other companies and private equity funds.

Citadel is aiming to sell two of its investments this year and next, one through a listing on the Cairo Stock Exchange and the other a "strategic sale", said Ahmed Heikal, the company's chairman and founder.

Mr Heikal said the target size for the stock listing of Taqa Arabia, an electricity producer, was US$175 million (Dh642.7m).

The company, of which Citadel owns 34 per cent, will use the proceeds to expand its capacity to generate sorely needed electricity in Cairo, he said.

Invest AD, owned by the Abu Dhabi Government through the Abu Dhabi Investment Council, is aiming to close at least one of three deals it is considering for its second private equity fund this year. The company started the fund with $75m of seed capital and aims to raise $400m.

Invest AD is in the advanced stages of talks to acquire a trio of companies in the Middle East worth about $150m combined, according to Samir Assaad, the company's head of private equity. They include an investment of between $35m and $40m in Turkey, a $60m company in the UAE and a company worth $45m to $50m in Egypt.

The National Investor is also planning an investment through one of its funds next month or in early December in the consumer and business services sector of the Gulf, said Yahya Jalil, the company's head of private equity. It will be a leveraged buyout, he said, a rarity in the region nowadays.

"We're buying a controlling stake and financing it with debt," he said. "It's interesting from the perspective that there haven't been leveraged transactions in the Middle East."

Mark Yassin, the senior general manager of corporate and investment banking at National Bank of Abu Dhabi, said his bank was talking to investors about launching a $250m private equity fund before the end of the year focused on the aviation industry.

In a sign of improving appetite for investment in Iraq, MerchantBridge, a global private equity group, has launched a fund worth $10m that is to invest in the country's stock market.

"The Iraq Stock Exchange can only go one way," said Eric le Blan, the chief operating officer. "But you have to be patient."