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Abraaj Sees Buyout Opportunities among Listed Firms

The Dubai-based company, which manages more than $7.5 billion in assets, is considering dozens of buyout opportunities, a “fair proportion” of which are listed companies it wants to take private, Arif Naqvi, 48, Abraaj’s group chief executive officer, said in an interview late yesterday. The best opportunities are in Saudi Arabia, Algeria, Libya, Turkey and India in industries including oil and gas, health care and education, Naqvi said.

“There are companies on the market today that I would salivate to buy at these levels,” Naqvi said at his Emirates Towers office in Dubai.” So will you see us buying companies on the stock market and taking them private? Without question, yes.” Share prices in Gulf Arab countries have crashed since the onset of the global credit crisis as foreign investors fled, lending grew scarce and on concerns the region’s once booming real-estate industry is poised for a slowdown. Saudi Arabia’s Tadawul All Share Index fell 56 per cent in 2008, while benchmark indexes in Dubai dropped 72 per cent and in Abu Dhabi by 47 per cent.

Abraaj, set up in 2002, accounts for about 25 per cent of all private equity funds raised in the Middle East and its co-investors include the region’s biggest sovereign and pension funds. It invests in Gulf Arab states, North Africa, Turkey and South Asia and has posted returns of 2.9 times cost from its 17 completed deals.

In 2007, Abraaj completed the $1.41 billion acquisition of Egyptian Fertilizers Co., the region’s largest leveraged buyout.

Abraaj will wait until shares of target companies have been stable for three or four months before making offers, Naqvi said. At this stage, an offer would be “termed opportunistic” and Abraaj is keen to forge partnerships with companies’ existing management to boost performance rather than to make predatory advances.

There are not many publicly traded companies in the oil and gas sector, although “there is Dana Gas, which in my opinion is cheap and has a fragmented shareholding, and my guess is that it would be easy” to take it private, Fadi Al Said, head of equities at ING Investment Management (Dubai) Ltd., said in a phone interview.

“Maybe some of the recently floated companies in the petrochemicals sector” could be targets, he added.

Abraaj is “having a dialogue” with the shareholders or management at several companies that it didn’t identify. Loans to part-fund some buyouts are available despite the credit environment and the sentiment against leveraged buyouts, Naqvi said. Bloomberg