Investcorp to raise $1bn buyout fund

Investcorp raises over $500m from investors in six months and is preparing to raise a dedicated private equity fund.

Investcorp, a Bahrain and London-listed alternative investment firm, is planning to continue its recent fundraising success in the Middle East by raising a $1 billion private equity fund later this year.

Investcorp raised $527 million (€406 million) from investors in the second half of last year, the firm said as it reported its interim results, 66 percent more than in the same period in 2005. Its success illustrates the growing demand from Middle Eastern investors, as they look to deploy growing pools of capital and increase their exposure to alternative assets.

The firm is now planning to tap into this demand to raise a $1 billion private equity fund. It has previously made investments from its balance sheet and syndicated the equity to its current investors.

Investcorp’s private equity division has enjoyed mixed fortunes recently. It is set to realise a substantial return on its investment in Apcoa, a German car parking company, after the business attracted several first round bids of more than €700 million ($908 million). However, it is expected to lose about £250 million from the restructuring of Polestar, a European printing company.

In total it realised $1.1 billion from four private equity investments during the period.

It has also closed three new deals in the last six months, for a total equity contribution of $537 million: logistics group Greatwide, insulation company Armacell and Moody, an engineering services firm. The firm is currently syndicating this equity to its Middle Eastern investors.

The period also saw Investcorp tapping into new sources of funding. In December it raised $398 million by listing global depositary receipts on the London Stock Exchange, a type of security that allows investors to hold shares in foreign companies that are already listed on other exchanges.

It is also planning to raise a growth capital fund for investments in the Gulf region. The firm is targeting at least $500 million in commitments, and will begin fundraising in the second half of 2007.

Investcorp has five lines of business – private equity, venture capital, hedge funds, real estate, and the new Gulf growth capital business, which will invest in greenfield “build” projects, and buyout and growth capital opportunities. Founded in 1982, it currently has more than $10 billion under management.