Gulf attracts first buyout fund

The Rasmala buyout fund, which will target a diversified portfolio of investments in the Middle East, North Africa and the sub-continent with a primary focus on the GCC countries and the Levant, has been set up. The fund has a target of $150 million and a target IRR of at least 30 per cent. It aims to make up to eight investments in manufacturing, consumer distribution, logistic, banking and financial services, media and energy businesses. It is the first Gulf-based fund, raised in the Gulf for investment in the Gulf.

Tim Marsden, partner at law firm Norton Rose, who helped develop the structure of the fund, said: “This is the first fund of its kind using leveraged buyout techniques in the Gulf region, which is a relatively untapped part of the world for LBO opportunities.” He added that the region was an immature market with scope for interesting opportunities.

The fund is a joint venture between two leading private equity firms in the region; the Cupola Group, which has already committed $40 million to the venture, and Rasmala Investments Limited. Deutsche Bank is a minority shareholder in the venture. An initial closing of $75 million is anticipated for the end of February with further closings throughout 2002.

The fund has five partners, Ali Samir al Shihabi, Arif Masood Naqvi, Imtiaz Hydari, Salman Mahdi and Shirish Saraf all with a proven track record of deal sourcing, structuring, placement and exit capability in the Middle East and Gulf region. The partners intend to maintain a minimum ownership interest of at least 75 per cent, ensuring continuity and long term alignment of interests with the limited partners.

Marsden said: “There have been successful funds raising Gulf money and making international investments, but very few that actually targeted Gulf-based investments.” This, he said, was because the quality of the investment professionals involved and the perceived quality of investment failed to convince. “This is the first fund that offers a truly world-class investment approach. Its professionals have an outstanding track record of delivering well above average returns and we are confident the fund will transform the image of the Gulf private equity market,” he said.

The fund has already proposed a $65 million bid for Aramex, a freight-forwarding company in the Middle East, active in 33 countries worldwide. The acquisition will be made through Rasmala Distribution, which is a special purpose vehicle set up in the Cayman Islands and Bermuda.

The acquisition will be financed with around $25 million from the Ramsala fund and other equity investors, $30 million of debt from regional bank Shua Capital and $10 million mezzanine from Capital Trust.

Marsden said: “A deal like this does not happen every day. It is extremely unusual to have a Gulf-based bid for a Nasdaq-listed company. This deal is bound significantly to raise the profile of this new fund, which we expect to go on and make a number of other interesting acquisitions.”