3i invests in Gulf-focused fund

The global private equity firm has made its second commitment as a limited partner this year, investing $15m in Dubai-based Ithmar Capital’s second fund.

London-listed private equity firm 3i has committed $15 million (€19 million) to Dubai-based private equity firm Ithmar Capital’s second fund, Ithmar Fund II, which is expected to raise $250 million in total.

According to 3i, the investment is the first example of a foreign private equity firm’s participation in a Gulf Co-operation Council fund to date.

Ithmar Fund II focuses on growth capital and buyout investments in all market sectors in United Arab Emirates, Kuwait, Qatar, Bahrain, Oman and Saudi Arabia.

Ithmar Capital set an initial $150 million target for Fund II, but is now expected to raise $250 million. “The expansion in fund size is not only due to high investor demand but, more fundamentally, due to the larger deal sizes that we have been witnessing over the past 12 months,” said Faisal Belhoul, founder and managing partner of Ithmar Capital, in a release.

Belhoul added: “Of the many opportunities in the region, Fund II will ideally finance around two to three of the best businesses a year with enterprise values of between $15 million and $500 million.”

Maha Masri, investor relations and marketing director at Ithmar Capital, told PEO that Fund II had a first closing of $60 million in September 2005 and a final close is expected later this year.

Fund II is substantially larger than its predecessor, which raised $70 million and is now fully invested, according to Ithmar Capital.

Masri said another two international fund investors are currently looking at making an allocation to the vehicle, adding that they are “well-known names”.

Paul Waller, a member of 3i Group’s management committee and an advisor to Ithmar Capital’s investment committee, said in the release that the alliance underscored international investor appetite for the Middle East and the Gulf economies in particular. “3i’s portfolio companies, like NCP, Hobbs and SR Technics, are increasingly interested in expansion opportunities in this region,” said Waller.

3i has increased its presence as a limited partner in the last few years. In February of this year, the firm allocated $20 million to Quadriga Capital Russia Private Equity Fund II, a Russia-focused vehicle that has raised $140 million to date. The firm also allocated $20 million in Israeli technology VC Giza Ventures Capital’s $150 million fourth fund.

3i has also invested in a Y50 billion (€350 million; $434 million) fundraising by Japanese mid-market buyout firm MKS Partners in 2004; invested $45m in Beijing-based CDH China’s second fund; and €100 million in 3TS Capital Partners’ second fund, which was the entire amount raised by the vehicle.