Samena Capital seeks billion-dollar deals

19 September 2008
Bahrain-based investment firm Samena Capital to take minority stakes in listed companies in the Middle East, North Africa and Asia.

Samena Capital will be able to make investments of up to $1bn, according to its founder, as it seeks to take advantage of opportunities in fast-growing Middle East and Asian markets.

In mid-September, it launched its first fund, the Samena Special Situations Fund, with $200m from its founding shareholders. This figure is expected to rise to about $400m by the end of October, once institutional investors are brought in.

However, Shirish Saraf, president and founder of the firm, says it will be able to draw on investors and shareholders to arrange far larger deals in the future.

“Because we have a body of shareholders and investors that can come in with us, we have access to significant pools of capital,” says Saraf, who previously co-founded Abraaj Capital. “This will mean we can have a co-investor vehicle set up alongside the fund. There is no size [limit] in terms of the deal. We can do a $1m deal, or a $1bn deal.”

Samena is expected to announce a group of up to eight institutional investors from Europe and the Middle East by 31 October. The firm has not approached any US institutions. Each institution is expected to invest up to $25m, although, according to Saraf, some have wanted to invest far more.

“We have in principle commitments from several institutions to participate in the fund,” he says. “We are going to decide the final allocations by 31 October.”

The apparent healthy appetite for the fund comes despite the turmoil in financial markets. “There are a lot of deals,” says Saraf. “I do not think deal flow is an issue.”

The fund will focus on taking minority stakes in listed companies in the Middle East, North Africa and Asia, including the Indian and Chinese markets. “Some 70-80 per cent [of our investments] will be strong minority positions in listed companies -small to medium caps,” says Saraf. “In some instances, we might go in and buy a major. The fund is fairly flexible.”

The first deal could come before the end of September, according to Saraf, with at least three deals already close to being completed in China, India and the Middle East. “There are three deals ongoing,” he says. “Our teams are on the verge of finishing due diligence.”

Some $250m should be invested by the end of this year, with the entire fund invested within two years. “By the end of this year, we are going to be at least 60-70 per cent invested,” says Saraf.

He is confident of the opportunities, despite the collapse and sale of several major US financial institutions, which has led to Gulf markets also falling.

“These markets in the US and Europe are going to go through a lull,” he says. “The beneficiaries over time will be some of the markets - in which we will be investing - that have not been exposed or gone into the excesses of the financial markets of the West.

“These [growth] markets are also going to be impacted, and will continue to be in the short term. The medium-term story is far too strong for these markets to remain laggards.

“The Middle East markets have already taken a downward correction. They were defying the laws of gravity earlier. They have taken a healthy correction in the past month. They have come to attractive levels we have not seen for the past three years.”

Other shareholders in Samena include chairman Atul Punj, founder and chairman of Indian engineering and construction giant Punj Lloyd, Sheikh Ziad Abdul Rahman al-Turki, vice-chairman of Saudi Arabia’s Atco Group, and Sheikh Nawaf Nasser bin Khahd al-Thani, chairman of Qatari conglomerate Nasser bin Khalid Holding.

Samena Special Situations fund

  • $200m: Value of the fund at launch

  • $400m: Expected value of the fund by the end of October

  • $250m: Amount to be invested by the end of the year

Source: Samena Capital

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