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Tuesday, 16 July 2019

It’s official — Actis takes over management of APEF IV and AAF III funds from Abraaj

It’s official — Actis takes over management of APEF IV and AAF III funds from Abraaj: Emerging markets private equity giant Actis has officially taken over the management of the Abraaj Private Equity Fund IV (APEF IV) and Abraaj Africa fund III (AAF III) in a landmark transaction for PE in the region, the firm announced in a statement yesterday. Following a year of negotiations and “a process that was extremely complex with multiple stakeholders,” Actis will now take over the two funds — with assets worth a combined USD 2.6 bn — from the now defunct PE firm Abraaj. It was reported earlier this month that Actis had received approval from the Financial Regulatory Authority for the fund’s Egypt-related assets. Reuters and the Wall Street Journal also have the story.

What does this mean for the regional PE landscape? The transaction includes investments in 14 portfolio companies across the two funds, and brings Actis’ assets under management to USD 12 bn. “This Abraaj transaction further bolsters Actis’ footprint in the growth markets and follows the addition and integration of Standard Chartered’s Principal Finance Real Estate business in Asia in 2018,” it said. “Actis’s takeover sees the firm add new investment professionals in its Nairobi, Johannesburg and Lagos offices, as well as adding a new office in Dubai,” according to the Wall Street Journal. APEF IV’s USD 1.6 bn portfolio includes Cleopatra Hospital Group, Nahda University in Egypt, and restaurants chain Kudu in Saudi Arabia. It also includes GCC-based oil company Viking Oil. AAF III’s USD 990 mn portfolio includes Java House in Kenya, Libstar in South Africa, and Nigerian chemicals company Indorama.

What it took to get here: Bloomberg reported that Actis received the support of 75% of limited partners in the funds, allowing it to take over the APEF IV and the AAF III. Actis had reportedly made an offer last September to acquire “the bulk” of Abraaj’s EM funds.

Meanwhile, Ahmed Badreldin’s RMBV takes over ANAF II from Abraaj: The announcement comes as Dutch fund manager RMBV terminated its relationship with Abraaj Investment Management Limited (AIML), and taken over management of the Abraaj North Africa Fund (ANAF II). The fund has assets under management of USD 600 mn, investing primarily in healthcare and education in Egypt, Algeria and Tunisia. RMBV’s management team includes Cleopatra Hospitals Non-Executive Chairman and former head of MENA at Abraaj Group Ahmed Badreldin.

The Cleopatra connection: APEF IV (currently being managed by Actis) and ANAF II (currently managed by RMBV) both hold an indirect stake in private sector healthcare giant Cleopatra Hospital Group (CHG) through Care Healthcare, which as of last week, holds a 37.9% stake in CHG. APEF IV has a 42.5% indirect interest in Care Healthcare, while ANAF II has a 30% indirect interest in Care, Badreldin tells Enterprise. Three of ANAF II’s investors — the European Bank for Reconstruction and Development (EBRD), German Investment Corporation (DEG), and PROPARCO — together hold a combined 27.5% indirect stake in Care separate from the fund.

What brought us here: The takeover is one of the final acts following the implosion of Abraaj, the one-time darling of the emerging markets private equity world. Abraaj filed for liquidation last year after investors accused the firm of mismanaging a USD 1 bn healthcare fund. Executives Mustafa Abdel-Wadood and Arif Naqvi were arrested in April and released on bail the following month. Abdel-Wadood pled guilty to racketeering and fraud charges earlier this month and will be appearing as a prosecution witness in Naqvi’s trial. US PE firm Colony Capital took over Abraaj’s Latin American operations earlier this year, while Franklin Templeton Investments held talks to acquire Abraaj’s Turkey operations.

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