The emerging market private equity arm of global insurance giant American International Group (AIG) has finalised the acquisition of a locally reported 30 percent ownership stake in UTI Group, a Romania-based provider of security systems and services.
AIG Capital Partners, the firm’s emerging markets private equity arm, had signed a definitive agreement for the $19.5 million (€15.4 million) transaction back in November 2005 and has since received the requisite regulatory approvals.
According to Pierre Mellinger, who heads up AIG’s private equity activities in Central and Eastern Europe, the UTI Group has much opportunity for growth, particularly in light of Romania’s upcoming accession to the European Union. “We are seeing an increasing number of a new generation of mid-sized companies like UTI that can be used as a platform to build out activities across the region,” says Mellinger.
UTI Group is headed by chief executive Tiberiu Urdareanu, who will continue to hold majority ownership of the company according to local reports. The company provides IT and physical security services for clients in the defence, public institutions, construction, retail, transport, industrial and corporate sectors.
The investment was managed by AIG Capital Partners’ Central and Eastern Europe team – housed at local offices in Warsaw, Budapest and Bucharest – and made through the AIG Global Emerging Markets Fund II (GEM II). The UTI deal is the fourth investment transaction executed by the team in Romania but is the first investment made through GEM II in the Central and Eastern Europe region.
The GEM II fund was set up in 2005 to invest in Asia, Central/Eastern/Southern Europe, Latin America, the Middle East and Africa. AIG Capital Partners originally raised $825 million for GEM II, but the fund has since reduced to $259 million following a change in management in April 2005.
Within AIG’s first global emerging markets private equity fund (GEM I) – which operated as a fund of funds – is the $320 million AIG New Europe Fund set up in 1998, and also managed by Mellinger’s team. The New Europe vehicle is fully invested and among its twelve investees are three Romanian companies, including mobile phone company Orange Romania which earned its private equity backers a 4x money multiple when sold to France Télécom in April 2005.
In contrast to its GEM I predecessor, GEM II makes direct investments in companies rather than operating as a fund of funds. The newer fund has a cap of 15 percent exposure in any single country, and roughly 20 to 35 percent of GEM II is earmarked for investments in Central, Eastern and Southern Europe.
AIG Capital Partners is a member company of global investment management concern AIG Global Investment Group, which has roughly $532.9 billion in assets under management, of which over $18 billion is in private equity assets.