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|| Abraaj Capital investing $700 million in small and medium sized firms

Abraaj.jpgAbraaj Capital, Dubai private equity firm managing $6.6 billion, plans to buy stakes in more than 100 small and medium sized companies by spending about $700 million from its Riyada Enterprise Development fund along with partner investors - the Bloomberg is reporting.

Abraaj plans to invest in health care, manufacturing, education, information and communication technologies, logistics, agribusiness and food industries in countries that include Egypt, Lebanon, Jordan, Algeria, Pakistan and Turkey, the Palestinian territories and the six Gulf Arab nations that make up the Gulf Cooperation Council. It is looking at 30% to 40% ownership and in some cases majority ownership.

Abraaj Capital is listed in the Middle East Investors Directory with the code OR01.

More details from the Bloomberg follows

Abraaj Capital Ltd., a Dubai-based buyout fund managing $6.6 billion, plans to buy stakes in more than 100 small- and medium-sized Middle East companies over the next four years to tap growth and boost productivity.

Abraaj will spend about $700 million from its Riyada Enterprise Development fund along with partner investors to buy "influential minority stakes" in companies, Tom Speechley, an executive director at Abraaj, said in an interview in Dubai yesterday. "Our first five investments are currently in the execution phase and another five close to execution."

Small and medium-sized enterprises, which account for 70 percent of the employment in the Middle East and North Africa region, only contribute 28 percent of gross domestic product, so there is an "opportunity" to boost productivity, he said.

Gulf Arab economies pump more than 20 percent of the world's crude oil and have been spending tens of billions of dollars on infrastructure and industry to boost growth. Oil exporting economies of the Middle East and North Africa will expand by an average 4.2 percent this year and by 4.6 percent in 2011, according to the International Monetary Fund.

Abraaj set up the $500 million Riyada fund last year to feed smaller country funds and focus on small and medium enterprises. In June, Overseas Private Investment Corp. committed $150 million to the fund following U.S. President Barack Obama's announcement last year that the U.S. would start an investment fund to support technological development in Muslim-majority countries.

Development

"We are investing for profit but we know there will be a positive, developmental impact because the SME segment is vital to the economies of the region," said Speechley at Abraaj's office at the Dubai International Financial Center.

Abraaj plans to invest in health care, manufacturing, education, information and communication technologies, logistics, agribusiness and food industries in countries that include Egypt, Lebanon, Jordan, Algeria, Pakistan and Turkey, the Palestinian territories and the six Gulf Arab nations that make up the Gulf Cooperation Council.

"We are looking at 30 to 40 percent ownership and in some cases majority ownership so that we have enough involvement in the business and a sense of partnership with the entrepreneur," Speechley said. Investments will range from $500,000 to $15 million, he said.

Abraaj has previously invested in small and medium companies through other funds and generated average returns of 5.7 times its original cost from 14 such deals, the company said in a statement.

Private Equity Deals

One of the Middle East's biggest private equity firms, Abraaj has invested in 35 transactions across 11 countries since being set up in 2002. It owns stakes in Air Arabia PJSC, the Middle East's oldest low-cost carrier, and Turkish hospital company Acibadem Healthcare Group.

Abraaj last year cut the size of its fourth buyout fund by half to $2 billion due to a "tight funding environment" and on expectations of a decline in the average deal size as asset prices dropped, according to the firm's annual report.



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