GPS STORM THE MIDDLE EAST

A fundraising pandemic is spreading in the Middle East and North Africa (MENA). According to reports, in the past nine months, as many as 90 private equity funds have been trying to raise over $50 billion (€39 billion) to invest in the MENA region.

Limited partner sources say they are being approached by a plethora of fund types, from direct funds to funds of funds; regional funds to country-specific; and venture capital to growth capital and buyouts.

One of the more high-profile GPs to set its sights on the Middle East is Washington DC-based The Carlyle Group. At the Global Private Equity Conference co-hosted by the International Finance Corporation and the Emerging Markets Private Equity Association in May, Carlyle founder David Rubenstein stated that the firm intended to dramatically increase its involvement in the Middle East region, as well as in Africa and Latin America. Last month, the Financial Times reported that Carlyle is planning to launch a $1 billion fund for investing in the Middle East. The firm declined to confirm or deny the report, and at press time, there was no evidence that it had formally begun marketing such a fund.

One LP source said that if Carlyle does pursue opportunities in the Middle East, given the firm's “infrastructure, knowledge base, discipline and established nature of what they do, I wouldn't be surprised to see them hit the $1 billion mark”.

However, the source added, it is unlikely that all GPs in the market will enjoy success – particularly those lacking private equity experience. The most compelling funds will be those in the $300 million to $500 million range with a sector or geographic focus, added the source.

Nine MENA funds raised a total of $1.5 billion (€1.17 billion) in the first half of 2006, according to a survey by the Gulf Venture Capital Association and Zawya. Of these, the largest launched in the period was Global Investment House's $1 billion Global Opportunistic Fund II, which targets pre-IPO and IPO opportunities across the Middle East, North Africa and Asia. Global's pipeline of deals spans the telecommunications, oil and gas, banking and mining sectors.

It remains to be seen how large LPs' appetite for Middle Eastern private equity funds proves to be, but it is clear that there is no shortage of opportunities for them to choose from.

CONDUIT'S LATIN POWER III CLOSES ON $393M
Conduit Capital Partners, a New ([A-z]+)-based private equity firm targeting energy investments in Latin America, has made a final close on $393 million (€311 million) for its Latin Power III fund. The vehicle is the largest private equity fund to be raised for investment in the Latin America region since 1998. Nearly two-thirds of the fund's capital was committed by US-based investors, with the remainder sourced from investors in Australia, the Middle East and Europe. According to Scott Swensen, co-founder and chairman of Conduit, the fundraising for Latin Power III was launched two and a half years ago, with the first close made 17 months into the fundraising process. The fund has a nine-year term and makes control investments in mediumsized power generation plants, primarily in Mexico, Central America, Peru and Chile.

IDB COMMITS $60M TO INFRASTRUCTURE MEZZ FUND
The Inter-American Development Bank (IDB) has authorised up to $60 million (€46.8 million) in the form of a senior loan for the Central American Mezzanine Infrastructure Fund (CAMIF). The fund has a target size of $150 million, and will be managed by EMP Global, a Washington DC-headquartered emerging markets private equity firm. Other commitments to the fund will come from the Central American Bank for Economic Integration, as well as other public and private investors. CAMIF will offer mezzanine financing for private infrastructure projects relating to energy, transportation, water and sanitation and telecommunications across Central America, as well as Mexico and Colombia.

PENNSYLVANIA COMMITS TO BRAIT IV
The Pennsylvania State Employees' Retirement System (PSERS) has approved a $25 million (€19.4 million) first-time commitment to South African private equity fund Brait IV, according to an announcement posted on the PSERS website. With its fourth fund, South African private equity fund manager Brait will continue the strategy adopted for its previous funds and acquire majority or significant minority equity stakes in local companies. Brait is targeting $500 million for Brait IV and anticipates making a final close by December 2006 as the largest South Africa fund raised to date. According to the firm's website, Brait has achieved a multiple of 2.7x and gross IRR of 48 percent on realised investments from its first three funds. The firm was founded in 1991 and has offices in Luxembourg, Johannesbourg, Cape Town, Mauritius and Switzerland.

CANADIAN SPONSORED AFRICA FUND REACHES $212M
The Canada Investment Fund for Africa (CIFA), a joint private-public partnership established by the Canadian government to facilitate foreign direct investment into Africa, has made a final close on $212 million (€166 million). The private equity fund is managed by Actis, a UK-headquartered emerging markets private equity firm, and Cordiant, a Canadian investment management firm whose core activities include private equity investing in the emerging markets. CIFA will invest in mid-market private equity opportunities in a variety of sectors in the form of buyout, expansion-stage, privatisation and mezzanine transactions. The fund will invest in markets across the continent, with a particular focus on South Africa, Nigeria, Egypt, Morocco, Algeria, East Africa and Francophone West Africa.

ACTIS TAKES PLATMIN PUBLIC
Platmin, a portfolio company of emerging markets specialist Actis, has raised C$45.5 million (€31.5 million; $40.4 million) through an initial public offering on the London Stock Exchange's Alternative Investment Market (AIM) and the Toronto Stock Exchange. The South Africa-based mining company's shares were three times oversubscribed. With the capital raised, Platmin will continue the development of four ongoing platinum exploration projects in the Bushveld region of South Africa. Actis was an early investor in Platmin, having initially backed the company in 2003. The emerging markets specialist invested a total of $35 million over the course of Platmin's four rounds of fundraising and now holds a 30 percent stake in the company.

NEW MONEY FOR MENAMore and more firms are setting their sights on Middle East-focused private equity funds. Below is a smattering of the many funds currently in the market for fresh capital.

Select MENA funds in the market
Firm Fund name Target size Geographic focus Type
Swicorp Financial Advisory Services Swicorp Joussour Fund $1bn GCC Private equity focusing on
energy and industrial
KeyStone Equity Partners Growth Gate $500m GCC Buyouts; PIPEs
NBK Capital NBK Private Equity Fund $300m GCC, Levant, Egypt Buyouts
Venture Capital Bank VC Bank $250m MENA SME
Boubyan Bank and Ryada Capital Ryada Capital Islamic LP Fund $150m MENA Buyouts
The National Investor TNI Private Equity Fund $150m GCC
Injazat Capital Shefa Healthcare Fund E.C. $100m MENA Buyouts in healthcare
Malaz Group SAGIA ICT Fund $100m MENA VC focusing on ICT
Minah Partners Minah Ventures $100m MENA VC focusing on ICT
Levant Capital Levant Capital $100m MENA Buyouts
Catalyst Private Equity $50m MENA Buyouts in IT
EFG-Hermes Private Equity, Horus Agri Fund $50m Egypt Buyouts focusing on agriculture
RAIS, and PrimeCorp