Tehran firm targets co-investment partners

Griffon Capital, which is seeking $130m for its debut fund, is looking to partner with international firms seeking to penetrate the untapped Iranian market.

Tehran-based Griffon Capital sees opportunities for its debut fund to co-invest alongside international investors eying the local market now international sanctions on Iran have been lifted, Griffon managing partner and head of private equity Xanyar Kamangar said.

“Overwhelmingly, [international investors] are looking for local co-investors and that is an opportunity for someone like us, who has the capital to deploy at this moment,” Kamangar said on an investor call.

Griffon has begun fundraising for its Iran Consumer Opportunity Private Equity Fund, which is targeting $130 million. It undertook a soft launch of the vehicle in February talking to investors in Europe, as reported by Private Equity International. It followed the announcement in mid-January that the US, EU and UN had lifted key trade and financial sanctions imposed on Iran in return for restrictions on its nuclear programme.

Kamangar said that “international players are quickly approaching the market. It’s not surprising. The [Iranian consumer] market is too big to forget.”

Global leaders in tobacco, personal and home care have already come to Iran, he said. In October, in anticipation of the sanctions decision, Japan Tobacco Company’s local subsidiary acquired Iranian cigarette maker Arian Tobacco Industries.

Kamangar said he expects future cross-border investment in the beverage and technology sectors, and noted that “giant US players are in Iran exploring their options”.

Griffon’s seven-year vehicle will invest in consumer-driven companies, writing tickets of $10-20 million. The firm is joined by a second Tehran-based asset management Turquoise Partners, which is raising a $150 million private equity fund to exploit untapped private equity opportunities and the potential of the local consumer sector.

Conditions are ripe for the next 12-18 months to invest in the fragmented consumer sector as spending is constrained, staple consumption is down 10 percent, dropping 30 percent for discretionary goods, and Iranian private companies are currently valued at a 20-25 percent discount to their public market counterparts, Kamangar said.

“In private equity it’s easiest to buy very cheap and that is where we are right now.”

The acquisition offers the fund is making are at “attractive valuations of around four or five times PE [price/earnings], excluding the synergies. Including synergies, these types of valuations are around two to three times PE.”

Griffon’s new vehicle is structured with typical private equity terms charging a management fee of 2.25 percent on committed capital during the investment period and 2 percent following acquisition, with a performance hurdle of eight percent and 20 percent carry.

Family offices and high net worth individuals are expected to be among the first to invest in Iranian private equity vehicles. Griffon’s fund has a minimum commitment size of $1 million.