Bahrain-based investment manager Investcorp is to acquire a 20 percent stake in Gulf Cryo, a Kuwait-based manufacturer of industrial, medical and specialty gases, for an undisclosed sum.
The investment, to be made from the Gulf Opportunity Fund I, will assist the firm’s expansion through organic growth and add-on acquisitions. The financial details of the transaction have not been disclosed.
Established in 1953, the company produces and transports specialty gases such as oxygen, nitrogen, argon and helium to clients in industries such as oil and gas, glass, food and beverages, healthcare, construction, metals and chemicals. It owns manufacturing plants, filling stations, and a proprietary pipeline network and tanker fleet.
Gulf Cryo currently has a presence in the United Arab Emirates, Jordan, Oman, Qatar, Saudi Arabia, Syria and Pakistan.
“It is an industry that we consider quite attractive because it supports service providers and the infrastructure build-up in the GCC,” Christophe de Mahieu, co-head of Investcorp's Gulf growth capital business, told PEI Asia, adding that the industry serves not only the oil and gas, but construction, chemicals, metals and healthcare sectors as well.
Furthermore, “it is a very resilient industry because it is characterised by very high barriers to entry”, he said. The company also benefits from double digit growth which is linked growth in the region. He added that the company is well positioned to grow in the future due to its presence across the GCC.
According to Investcorp, the industrial gases market in the Middle East has estimated annual sales of $1.5 billion and has been growing at an average of 12 percent per annum, making it one of the world’s fastest growing markets for industrial gases.
This will be the third investment from the $1 billion Gulf Opportunity Fund I. In March, the firm acquired a 51 percent stake in L'Azurde, a Saudi Arabian gold and jewellery company valued at $300 million. In November 2008, it acquired a significant minority stake in Redington Gulf, an IT and telecom distributor and service provider.
Following this investment, one-third of the fund's capital will be deployed, the firm said.
With significant tightening of credit in the Gulf, Investcorp is seeing tremendous opportunity for growth capital and is looking for more partnerships with families to help their companies to grow because their access to credit has been limited, de Mahieu remarked.
The firm, which did not make any investments in 2007 and the first half of 2008 now intends to increase the velocity of its investments. “We’re looking quite actively in the healthcare and education sectors and in the oil and gas servicing side,” he said. While the firm will still predominantly look into the pan-GCC region, it will also opportunistically consider opportunities in Egypt and Turkey.
de Mahieu also said that Investcorp is keen for opportunities to tap into companies in Southeast Asia if they have a Middle East angle to them. “I believe there is a natural connectivity between the Middle East and Asia Pacific. We are very keen to see if we are able to structure bridges between the two regions in sectors such as construction materials, oil and gas, healthcare and education,” he said.
Earlier this year, Investcorp recorded its first ever annual loss, having written down its private equity and real estate co-investments by $350 million. Its net annual loss for the year ending June 2009 stood at $780.6 million.
The firm’s total assets at the end of June 2009 stood at $3.6 billion.