Abu Dhabi-based Gulf Capital wraps up overflowing private equity fund

Chief executive confirmed that the company was studying an initial public offering among a range of funding options.

Muhannad M Qubaj, Gulf Capital managing director, and the company's CEO, Karim El Solh (left). Lee Hoagland / The National

Gulf Capital, the Abu Dhabi-based alternative asset management firm, has closed its third private equity fund after raising US$750 million, well ahead of the target it set in January.

The fund, GC Equity Partners III, was launched to raise a minimum of $550m but was closed this month having attracted more than $750m, most of that coming from international investors seeking lucrative opportunities in the fast-growing Arabian Gulf economies.

Karim El Solh, the chief executive of the company, also confirmed that it was studying an initial public offering among a range of funding options that its 300 or so shareholders were considering. “At some point, we will have a discussion with them,” he said.

There has been speculation that Gulf Capital is seeking to list shares on the Abu Dhabi Securities Exchange, but Mr El Solh said that was only one of a series of possibilities, including issuing bonds, raising new private equity and bank borrowings.

“Shareholders enjoy very nice dividends and the shares are already traded over the counter, so we have to decide it [an IPO] is advantageous for them,” he added.

He highlighted the performance of the firm’s second private equity fund, which closed in 2010 and has since delivered a compound 25 per cent return to investors, nearly tripling the value of their original investment. There were no write-downs or write-offs, he said.

The third fund has been closed, with about 60 per cent of the capital coming from Asian, European and American investors. Foreign sovereign wealth funds and other big investors have shown a big interest, Mr El Solh said.

“International investors are definitely attracted by the fact we are investing in the Gulf, where there are high rates of growth, demographics and strong government investment.

Muhannad Qubbaj, the managing director of the private equity division, said: “Global investors are attracted by third-world demography and first-world economics.”

Gulf Capital has $3.3 billion assets under management in seven funds and special purpose vehicles, with real estate as the biggest single part of the assets’ split. But it is also invested in oil and gas services, growth sectors such as health and education, and sectors with a big element of government involvement.

“Basically we’re big on anything that has to do with the growing young population we have here in the Arabian Gulf. Health and schools, of course, but also low to mid-range housing, food and beverages — the basics. We like boring but sustainable things such as mattresses,” Mr Qubbaj said.

One of the big successes of the second fund was the IPO of Gulf Marine Services, which Gulf Capital floated on the London Stock Exchange with a market capitalisation of £472m (Dh2.78 billion).

In July Gulf Capital sold Metito, which it had grown into the region’s largest privately-owned water company, to Mitsubishi of Japan in a deal that gave a three-fold return on its investment. “It was a beautiful cross-border transaction,” Mr El Solh said.

He said that Gulf Capital was already in talks with a number of possible target companies. “We can move very quickly when we chose. We don’t replace management, we supplement. Buying into the management is our biggest single investment decision,” he said.

He added there was little local competition in the private equity business. “Our real competition is not other private equity groups, but the increased liquidity of the banking business and the fact that capital markets are opening up again,” Mr Qubbaj said.

Gulf Capital’s competitor, Abraaj Group, has traditionally been regarded as the biggest private equity group based in the GCC, with $7.5bn of assets under management, but has recently expanded its international reach to become a “global growth markets investor”.

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