Asia Watch, Feb. 12, 2007

Abraaj raises $500M in first close

Abraaj Capital announced last week it held a first close of its Infrastructure and Growth Capital Fund with $500 million in commitments.

The Dubai-based firm is aiming to raise $2 billion for the fund, which will invest in private equity deals in the Middle East, North Africa and South Asia. Among the targeted sectors are utilities, health care, education, transportation and ports.

The fund is being managed by Abraaj Capital and co-sponsored by Deutsche Bank and Ithmaar Bank.

The firm expects to have a final after June. 2007, with a final close shortly thereafter. The pipeline of deals ready to go into the fund now or in very advanced stages is extremely strong. As a consequence we will need to manage fund closings to ensure that early investors are not penalized by carrying investments for later investors. It is likely that closings after March will begin to attract premiums.’

Last year, Abraaj launched a separate $300 million joint venture with Sabre Capital focused on private equity deals in India.

Asia lures big buyouts shops

The U.S. industry’s biggest buyout names are descending on China, Japan, India, Korea and Australia.

Leading the charge is Kohlberg Kravis Roberts & Co., which plans to close this year on a $4 billion Asia fund. It would be the New York firm’s first dedicated vehicle for the continent and the largest Asia-specific fund ever raised by an American firm. KKR opened its first Asian offices last year.

Not to be outdone, Boston-based Bain Capital plans to close this month on a $1 billion Asia fund, its first in the region. Bain opened offices in Tokyo and Shanghai in 2006, following the opening of its Hong Kong site the year before.

Providence Equity Partners, the Rhode Island-based telecom and media LBO specialist, last month opened its first Asian offices in Hong Kong and New Delhi. Also last month, the Blackstone Group hung a shingle on the door for its new Hong Kong office, following the launch of its first Asian branch in Mumbai in 2005.

“You have an opportunity to create some of the great enterprises of the next 100 years,” says Timothy Dattels, a Texas Pacific Group partner and Asia specialist. “You’re not going to build those from San Francisco or New York. You have to be on the ground.”

To be sure, the Asian boom isn’t for everyone. Only the well-funded can spend the years and dollars it takes to build up an office in a region where the buyout model is still relatively untested. A principal at one firm pointed out that many of the LBO shops that are pushing into Asia are the same players that have been clubbing in America to produce the biggest buyouts in history. They could easily reproduce those feats in Asia. “When competition enters the market, it’s good for [our] firm because it expands the pie,” the source said.

Asia is also finally starting to produce a fair number of exits. The number of private equity-backed divestitures in Asia grew 25 % between 2004 and 2005, returning $19.8 billion on $5.9 billion invested, according to the Centre for Private Equity Research’s most recent data, which encompasses buyouts, venture capital and growth capital.

Bain Capital invests in mall operator

Jinsheng Group

, a Nanjing, China-based mall operator and real estate development company, has raised $60 million in private equity funding from Bain Capital ($45 million) and CBL & Associates Properties Inc. ($15 million). CBL and Bain Capital have also been granted a three-year warrant in the business for an additional combined investment of $7.5 million, exercisable at the buyers’ option.