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Mena Region Offers ‘Untapped Opportunities’ to PE Firms

DUBAI — Economies of the Middle East and North Africa region hold significant untapped opportunities for confident investors, head of a leading private equity firm said on Monday.

The region offers private equity investors “outstanding vintage years” with a confluence of distressed assets, distressed sellers and governments with over-stretched balance sheets, Ahmed Heikal, Chairman and Founder of Citadel Capital, said in his keynote speech at the Private Equity SuperReturn Middle East conference in Dubai.

Compelling conditions across the region dictate that now is the time to invest, Heikal said.

The Middle East and North African economies have fared better than most over the past year, Heikal said. “Indeed, the crisis now presents significant opportunities for private equity firms with the skill and capital to 
pursue them.”

However, the investments to come will not be the traditional large acquisitions of the type private equity had been making prior to the crisis. Instead, it will involve packaging grand ideas into modular investments, said Heikal whose company has $8.3 billion in investments under control.

He said Citadel would head a consortium to invest $1 billion in equity in a second-stage petrochemicals refinery near Cairo.

The project has a total value of around $3.5 billion, including $2.25 billion in debt, said Heikal.

Hisham El-Khazindar, Citadel Capital’s Managing Director and Cofounder, said the region had moved from skepticism about private equity to understanding the asset class as a powerful source of capital. “The industry will be a prominent channel of capital and expertise to cash-strapped companies, working with banks, investors and development and export agencies to help grow increasingly diverse economies,” he said.The four-day conference, which opened on Sunday, has drawn private equity chiefs from the world’s leading private equity firms including Blackstone Group, Carlyle Group and Providence Equity Partners along with regional heavyweights Citadel Capital, Saudi-based Swicorp and Dubai-based Abraaj Capital.

Mustafa Abdel Wadood, Managing Director of Abraaj Capital said the private equity firm might lower the size of its $4 billion buyout fund as investors have become more cautious about committing money for investment due to the impact of the global economic slowdown.

He said Abraaj would be looking at investment opportunities in Saudi Arabia, Egypt and Turkey. These include investments in a range of industries including logistics, transport, consumer businesses and financial services.

Sounding upbeat about the region’s economy, he said the private equity sector had “moved past the pessimistic stage.” “There’s general consensus that even if we’re not out of the crisis, the worst is behind us in terms of a freefall. At least we’ve hit somewhat of a bottom,” said Abdel-Wadood. Karim el-Solh, Chief Executive of Gulf Capital, said his company was looking to invest $500 million in Saudi Arabia, the UAE and Egypt. The opportunities include a deal in the healthcare sector that would be announced soon, el-Solh was quoted by Reuters as saying on the sidelines of 
the conference.

He said private equity activity in the Middle East in 2009 dropped significantly with the sector sitting on more than $11 billion.

The United States-based private equity giant Kohlberg Kravis Roberts & Co or KKR said at the conference it was keen to invest in the Middle East and North Africa by striking partnerships and teaming up with local players.

Makram Azar, regional head of KKR said the economic situation, in terms of debt and equity markets, had been improving and he was more confident about investment opportunities.

“The situation has been getting better. You can feel it and hear it, particularly talking to people in the region,” Azar was quoted as saying at the private equity conference.

· issacjohn@khaleejtimes.com