Warburg Pincus Wagers on Mideast, Africa After Dubai Investment

Warburg Pincus LLC, the private-equity firm managing about $37 billion in assets, is considering investments in Africa and the Middle East as capital starts to flow back into emerging markets.

“We are looking beyond the core euro-zone markets into the rapidly growing emerging markets around Europe for investment opportunities,” Joseph Schull, head of Warburg Pincus in Europe, said in an interview yesterday. “Africa is the next big frontier in private equity and we are spending an increasing amount of time investigating opportunities in that region.”

Investors are seeking out acquisition opportunities in less-developed markets in the Middle East and Africa as economic growth accelerates and financial markets recover from the credit crisis. Money is also returning to emerging markets, with exchange-traded funds attracting $1.4 billion in the first three days of April, as countries take steps to stabilize their economies, according to data compiled by Bloomberg.

Standard Chartered Plc, the London-based bank present in Africa for more than 150 years, said in February it’s investing more money in private-equity deals there than in any other region in which it operates. Robert Diamond’s Atlas Mara Co-Nvest Ltd. this month agreed to buy a stake in state-owned Development Bank of Rwanda, while KKR & Co. is competing with Abraaj Group to buy a stake in Saudi Arabian restaurant business Kudu, two people familiar with the deal said in September.

Dubai Acquisition

New York-based Warburg Pincus made its first investment in the Middle East today, agreeing to acquire a controlling stake in Mercator, a Dubai aviation software-solutions company owned by Emirates’ Dnata unit. Mercator provides services to airlines including United Airlines Inc. (UAL) and British Airways Plc, the two companies said in a joint statement today, without disclosing financial details of the transaction.

“This is a growth equity investment for Warburg, our first in the Middle East, and there is no debt involved in the transaction,” Schull said. “This business can be a multiple of its current size.”

Warburg Pincus expects to double or triple its initial investment in Mercator in the coming years and is also exploring add-on acquisitions to expand the business, Schull said, without identifying potential targets. Mercator has more than 125 airline clients in 80 countries.

Warburg Pincus, founded in 1966, owns stakes in more than 120 businesses and last year hired former U.S. Treasury secretary Timothy Geithner as its president. In 2013, it agreed to sell luxury retailer Neiman Marcus Inc. to an investor group for $6 billion, and sold eye-care company Bausch & Lomb Holdings Inc. to Valeant Pharmaceuticals International Inc. in an $8.7 billion deal. The company has more than $9 billion in emerging-market investments.

To contact the reporter on this story: Dinesh Nair in Dubai at dnair5@bloomberg.net

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net Shaji Mathew, Dylan Griffiths

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