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Abraaj buys Aureos in emerging market push

Abraaj, based in Dubai, declined to give financial terms for the deal to buy Aureos, which manages assets of $1.3 billion and provides expansion and buyout funding to small and medium-sized businesses in Asia, Africa and Latin America.

“We are putting together two complementary platforms. Both firms are on the ground,” Mustafa Abdel-Wadood, Abraaj’s chief executive officer, told a news conference.

“In the case of Aureos, they have been investing in (small and medium enterprises) for over 10 years.”

Abdel-Wadood said he expected the deal to close this quarter. The combined company will operate in 30 emerging countries.

“We’re using Abraaj’s balance sheet for this deal,” he said. Abraaj, which sold its stake in Turkish hospital group Acibadem in December for what it said then was a “significant profit”, will not be raising fresh debt for the acquisition.

Abraaj, founded in 2002 by Group Chief Executive Arif Naqvi, has raised $7 billion since its inception. It owns stakes in Orascom Construction, budget carrier Air Arabia , supermarket chain Spinneys and education group GEMS. Funds managed by the group have stakes in 35 companies across the region.

Naqvi, a 51-year old Pakistani, is one of the most influential financiers in the region and is spearheading an effort to make the firm an emerging market powerhouse.

Last year, Abraaj bought the North African private equity operations of French asset manager Amundi, and came close to buying Egyptian rival Citadel Capital, a deal which fell through.

“This is a very deliberate path of going for emerging markets exposure. Part of that path is building the expertise and the infrastructure to gain exposure to these markets,” Abdel-Wadood said.

Aureos manages 17 regional private equity funds, including a South Asia Fund and an Africa Health fund.

The Middle East and North Africa regions are important investment areas for private equity firms, which have raised $22.7 billion to invest into the area in the past five years, according to figures from London-based research firm Preqin.

Deal activity in the region is showing signs of rebound after a period of slowdown following the global financial crisis.

Abraaj plans to sell up to four of its investments in the next 18 months. It sold its stake in Turkey’s Acibadem to Integrated Healthcare Holdings (IHH), a healthcare unit of Malaysia’s Khazanah Nasional. The deal valued Acibadem at around $1.68 billion.