Saudi Arabian government-owned bank takes stake in HBG

Middle Eastern private equity firm HBG Holdings has sold a management company stake to a private equity fund of The National Commercial Bank of Saudi Arabia, as Middle Eastern governments continue to buy into the asset class.

HBG Holdings has sold a strategic stake in its management company to NCBC, a subsidiary of The National Commercial Bank of Saudi Arabia for an undisclosed sum, according to a statement.

The stake will be acquired by the Saudi bank’s Oryx Regional Private Equity Fund.

Oryx will become one of the largest shareholders in the HBG management company and will also anchor the firm’s $200 million (€134.5 million) pan-regional private equity fund. Oryx will also be represented on the board of directors and executive committee of HBG.

At Davos, The Carlyle Group’s David Rubenstein suggested sovereign funds would look to make larger contributions to regionally based buyout firms to retain funds in their regions instead of paying fees and providing profits for larger US-based global buyout firms.

Rubenstein said he believed sovereign funds would attempt to circumvent European and US regulations by not owning such companies, while holding large stakes in their funds as limited partners.

HBG is presently far smaller than some of its local competitors such as Abraaj Capital or Dubai International Capital, an investment firm owned by Dubai Holding, a company owned by the ruler of Dubai, Sheikh Mohamed bin Rashid al Maktoum.

Sovereign funds and government investment vehicles have bought several stakes in large buyout firms and hedge funds including the Chinese government’s acquisition of a 9.9 percent stake in The Blackstone Group for $3 billion and the Abu Dhabi sovereign fund Mubadala’s acquisition of a 7.5 percent stake in Carlyle for $1.35 billion.

HBG's chairman of the board of directors Abdallah Al-Mouallimi said his business had held joint venture discussions with various institutions. Initial discussions between HBG and NCB began in late 2006.

The firm held a $120 million second close in November of its latest $200 million regional fund. Unlike many of its Middle Eastern peers HBG’s focus is primarily on the Middle East and South Asia with less participation in the North African market which has led to the commonly used MENA abbreviation for the region's firms.