UAE's Al Fakher Tobacco catches the eye of Europe's largest private equity

The shisha maker is a potential target for CVC Capital as it looks to expand into the Middle East

CVC Capital is considering to invest in UAE shisha maker, Al Fakher Tobacco Trading. Salah Malkawi / The National

CVC Capital Partners is considering its first investment in the Middle East as Europe’s largest private equity company works to expand its business into new geographies, according to people familiar with the matter.

The London-based buyout firm has considered potential targets including UAE-based shisha maker Al Fakher Tobacco Trading as well as education companies, the people said, asking not to be identified as the information is not public. CVC was also one of the companies considering a bid for a stake in property developer Emaar Properties’s entertainment division, people familiar with the matter said previously.

CVC was in advanced talks with Al Fakher though discussions faltered, the people said. The buyout firm is also studying other potential transactions in the region, according to the people. No final agreements have been reached, and CVC may decide against pursuing investments in the firms, they said.

A spokesman for CVC declined to comment. Al Fakher didn’t immediately respond to requests.

CVC’s push into the region is being led by Istvan Szoke, its London-based partner responsible for the firm’s emerging markets investments in Europe, the people said. Ozgur Onder, a managing director, is also involved in identifying opportunities, they said.

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The buyout firm has been looking at opportunities to make full or partial investments in the Middle East for some time and is attracted by the region’s young-and-growing population, one of the people said. A sharp drop in oil prices in the last few years and its impact on local economies has also pushed some businesses to look for investors, the person said.

Foreign bidders have been buying more assets in the Middle East and Africa in the last 12 months, agreeing to spend US$28.5 billion in the period, 26 per cent higher than the previous year, according to data compiled by Bloomberg. Amazon.com Inc. agreed to buy Dubai-based online retailer Souq.com in March in a bet that e-commerce in the region is poised to take off.

Private equity firms are exploring new territory as they raise record amounts of dry powder from investors. CVC raised $19bn for its seventh pool of capital in June, its biggest-ever fund. The firm, which has commitments of $85bn in funds for its private equity and credit investment pools, has previously invested in the Formula One auto racing series and has agreed to buy Swiss watchmaker Breitling AG.

CVC targets European investments with a minimum equity value of $150 million and at least $50 million for opportunities in Asia, according to its website. The firm has holdings worldwide including in the US, Sweden, Iceland and Malaysia.