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MFC Plans $600m Private Equity Funds

Abdul Basit / 14 December 2008

DUBAI — The Millennium Finance Corporation (MFC) — a Sharia-compliant investment bank — plans to launch three private equity funds with a total value of $600 million, which are expected to close in the first half of next year.

“We are launching three new funds: a Clean Energy Fund, focusing on such renewable energy technologies as wind, solar, and biofuels; an Africa Fund, focusing on investing in sub-Saharan  Africa; and a Real Estate Fund,” COO of MFC Ahmad Atwan told Khaleej Times during an exclusive interview.

“MFC aims to make each fund at 
least $200 million in size and expected to close all funds in the first half of 2009.”

“As a local investment bank and private equity company, Millennium continues to do business in the region and other emerging markets. Despite current conditions, Millennium Private Equity is launching its third industry-specific fund, this one focused on green/clean energy. This is an industry that can do well, even in a downturn, because of decreasing costs versus fossil fuels and continuing demand for green technologies — after all, we are facing a global climate crisis whether or not there is a global economic slowdown.”

Atwan informed, “The fund expects to have its first close of $150 million in March 2009. Millennium Private 
Equity is partnering on the fund with Advanced Equities Inc., a Silicon Valley venture capital investment bank that specialises in late-stage private equity finance for technology companies.”

“The fund already has a strong deal pipeline and is looking at companies with cutting-edge technologies in solar, wind, alternative fuels and energy efficiency, among others.

“The fund targets late-stage firms with positive cash flow and low technology risks — something that is demonstrated by their technologies having already been proven in the marketplace. The fund will bring these technologies to Dubai and the region.”

Atwan advised people to show patience as it is a very difficult economic crisis where people are getting frustrated at losing money in stock market. The bond market is also going down but if investors focus on quality they can make money.

“We do believe that the UAE markets have gone too low and that stocks are generally significantly undervalued. We like stocks in the telecommunications, energy, and real estate sectors as good value purchases right now,” said Atwan.

MFC has also planned to open new offices in Saudi Arabia, in Nigeria to cover Africa, and India, as it seeks to capitalise on the growth of these high potential markets.

Messenger of Peace

MFC is fundraising for a “100 million film to be made on the life of the Prophet Muhammed (peace be upon him). This will be a remake, update and elaboration on the 1976 movie “The Message”, which was directed by Moustapha Akkad and starred Anthony Quinn. The new film will be reviewed by MFC’s Sharia board to ensure that it complies with Sharia and that the script is true to the holy Quran. The film seeks to enhance understanding and cooperation between the Muslim world and the West.

The credit crisis and deepening economic downturn offer a challenging backdrop to investment banking and private equity operations.

However, those firms that push through and keep doing deals in this environment will emerge stronger than other firms who take a more cautious stance.

Investment Banking

According to Atwan, MFC’s investment banking activities will focus on areas such as M&A and advisory, for clients looking to acquire firms at competitive prices and facilitate cross-border acquisitions of companies and other assets in commodity-rich Africa by Asian and MENA firms.

There is even room, given the very low valuations (below book value) of publicly traded companies on stock markets in the region, for regional or international companies to come in and buy enough stock to take a minority influencing position or even a majority stake in these companies.

Private Equity

“While private equity fundraising is tough in this environment, there are companies with solid financials that have an appetite for good investments and for opportunities in still-growing sectors such as green/clean energy,” commented Atwan.

On the other side of the coin, the current crisis is like a massive worldwide sale on assets that may not last very long. There are smart buys and good deals in today’s market that offer tremendous ROI potential. Due diligence is particularly significant given current conditions.

abdulbasit@khaleejtimes.com
 
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