Abraaj Buys Aureos Capital to Expand in Asia, Latin America

Abraaj Capital Ltd., the Middle East’s biggest private equity firm, agreed to buy Aureos Capital Ltd. to expand its investments in small and medium-sized companies in Africa and Latin America.

The combined firm will oversee $7.5 billion and 153 investments across more than 30 countries in emerging markets, Abraaj Chief Executive Officer Mustafa Abdel Wadood told a news conference in Dubai today. He declined to say how much the firm paid for London-based Aureos.

Abraaj, started in Dubai a decade ago, has been seeking to expand outside the Middle East to Asia and Africa as the financial crisis crimped growth in the Emirate. The firm set up the $650 million Riyada Enterprise Development fund in 2009 to buy stakes in small and medium-sized companies in the Middle East, Africa, Turkey and Pakistan. The firm also bought a North African private-equity fund from Amundi, the asset manager owned by Societe Generale SA and Credit Agricole SA, in August.

“The deal underlies the criticality of investing into emerging markets, and the opportunity,” Abraaj founder Arif Naqvi said in a Bloomberg Television interview today. “The fact that there are 1.2 billion people in emerging markets that are from the middle class and that’s more than the entire population of the OECD.”

CDC Group

The takeover, which is still subject to regulatory approval, is expected to close this quarter, Abraaj said. The company will use the Aureos brand for its small and medium-enterprise investments, Abdel-Wadood said. The firm says such investments range from $500,000 to $15 million.

Aureos, which invests in small to mid-cap businesses, was spun off in 2001 from London-based CDC Group Plc, the British government’s former Colonial Development Corp. It has $1.3 billion assets under management and a presence in 20 countries including China, with Costa Rica, Singapore and Kenya serving as regional hubs.

In 2009, Abraaj looked to buy London-based buyout fund manager Candover Partners Ltd. “in a purely opportunistic way” to expand in Europe, after the British firm’s owner defaulted on a 1 billion euro commitment, Naqvi said in an interview today in London. Abraaj, which is currently investing its latest $2 billion buyout fund, realized that year that its DNA was rather in emerging markets, Naqvi said. Now, after the Amundi and Aureos acquisitions, it intends to pause, he said.

“We are an emerging markets-firm, so for us the most important thing is to continue to expand our geography. This transaction has given us completeness in the small and medium enterprise segment,” Naqvi said. “On the buyout side, we’re completely confident investing our own funds. We don’t need to buy anything.”

Abraaj’s founder said he doesn’t have any immediate plan to list his firm. “That’s not what we’re not thinking of, but every private equity firm thinks about it at some point,” he said in the Bloomberg Television interview.

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