Middle Eastern equity fund seen expanding in SE Asia

Dubai-based Abraaj Capital—a private equity fund that counts Middle East royal families and high net worth individuals and sovereign funds as investors—is exploring more investment opportunities in Southeast Asia, including the Philippines.

Abraaj Capital established its presence in Southeast Asia with the acquisition of Aureos Capital, which has become the platform for its investments in small and medium enterprises.

In the Philippines, Aureos Capital has investments in restaurant chain Pancake House, electronics manufacturer Cirtek Holdings Inc., healthcare institution Daniel O. Mercado Medical Center and the Hortalezas’ personal care store chain HBC Inc.

Aureos Capital now has two funds devoted to Southeast Asia. The first—which has $80 million in funds—has been fully invested in sectors like healthcare, manufacturing, logistics, retail and restaurant chain. This first fund is now in the exit mode. The second has a fund of $200 million to $250 million.

Formerly focused on the Middle East-North Africa and South Asia, Abraaj is keen on expanding its foothold in Southeast Asia, including the Philippines, top officials of Abraaj and Aureos said in an interview with the Inquirer at the sidelines of the recent World Economic Forum East Asian Summit in Bangkok.

“You are going to see Abraaj coming with larger acquisitions,” the officials said, adding that investments would be focused on healthcare, education, logistics, financial services and insurance. These are the sectors that stand to benefit from a consumer-led growth that is occurring in emerging markets.

“We see common trends of young populations and growing middle class. It is a phenomenon we have seen in the region,” Abraaj Capital partner Frederic Sicre said.

Sicre said Abraaj would also look at new products like infrastructure funds.

Infrastructure-building is a big thing across Asia, which has to cope with rising population and economic growth. Its funds typically have a life span of about 10 years but the usual holding period is between four and six years.

“This is not financial investing. This is really value creation, thinking long term. A lot of people in the company have operational background—marketing, sales, supply side management and they can contribute in unlocking efficiencies,” Sicre said.

Kavee Phunratanamala, an investment principal at Aureos, said the company had the capability to invest $10 million to several hundred million of dollars in each venture.

Abraaj now has 150 investee companies in its stable and has put in place a structure so that companies in its portfolio could draw synergies from each other.

“If Aureos has invested in an agricutural farm, we own the largest supermarket retail company throughout the Middle East. They (Aureos) have pharmaceutical companies, we own the largest chain of pharmacies and retail outlets in the Kingdom of Saudi Arabia,” Sicre said.

“We’re looking at bundling together some of the assets working in the same sector and look at how we can add value to that,” he said.

Citing an example in the Philippines, Phunratanamala said such synergy was harnessed in the case of Pancake House.

“Through our network, we helped them expand in Malaysia. They tried by themselves (but) they couldn’t do it. We remodeled it and they have a few stores right now in Malaysia,” he said.

As Abraaj group was expanding its markets, Sicre said it knew the importance of “being local.”