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Largest Middle East PE fund holds first close

The first closings of Abraaj Capital’s second buyout fund on $300m and Shuaa Partners’ debut vehicle on $160m indicate strong investor appetite in the Middle East for local private equity.

Dubai-headquartered private equity firm Abraaj Capital has held the first close of its second buyout fund on $300 million (€245 million).

This is a reflection of the heightened interest of investors, financial institutions as well as individuals, in private equity investing in the Middle East.

Arif Naqvi, CEO, Abraaj Capital

Abraaj Buyout Fund II (ABOF II) has a final target of $500 million and the first close on $300 million makes the new vehicle the largest private equity fund in the region. The date of the final closing has been brought forward from December 31st to September 30th 2005.

The first closing attracted what the firm described as “a significant response” from regional institutions including Dubai International Capital, which committed $25 million to the fund.

Commenting on the first close, Abraaj chief executive Arif Naqvi said in a statement: “This response is not just about Abraaj’s past successes, but it also is a reflection of the heightened interest of investors, financial institutions as well as individuals, in private equity investing in the Middle East.”

Abraaj’s first fund, the $116 million ABOF I is fully invested and according to the firm has returned 85 percent of principal to investors within 18 months of closing. The fund has made significant exits from its investments in global logistics company Aramex (5x money) and Oman National Investment Corporation, which provided an IRR of 84 percent. The fund has six remaining investments.

From the new fund, Abraaj has made its first capital drawdown of 25 percent and intends to deploy that amount in the next six to eight months’ time, with the potential to invest in up to 20 companies from the fund.

Meanwhile, in the last week Shuaa Partners, the private equity arm of Shuaa Capital, has announced the first close of its debut private equity fund on $160 million.

Shuaa Partners Fund I had an original target of $150 million, but due to investor demand, will likely close on $200 million in the next few weeks, according to the firm.

Shuaa Capital was set up as an investment bank in 1979 and has been co-managing the $55 million MENAVEST fund with Capital Trust since 1998.

However, this is the first fund since the firm recently launched its stand-alone private equity division, headed up by managing director Abe Saad.