Deals – February 2008

Bahrain investor goes large in US
Bahraini investment group Unicorn Investment Bank has bought an 80 percent stake in Victron, a US electronic supply chain manager, for an undisclosed sum. Victron provides electronic supply chain management to industries including medicine, automotives, and wireless telecoms.

Completed in January, the investment was Unicorn’s second buyout in the US in a month following the acquisition of a 75 percent stake in microchip manufacturer Open-Silicon in December. The deals come as Unicorn is advancing with plans to raise a $150 million investment fund.

MENA private equity firms have continued to invest while many of their large buyout peers in Western markets have stalled following the credit surge. From January to November 2007, MENA firms provided only 2.8 percent of global private equity deal volume, but towards the end of this period, in the months of October and November, they accounted for 17.7 percent of global deal volume, according to Dealogic.

H&Q takes control of Taiwan Sumida Electronics
H&Q Asia Pacific has acquired an 85.1 percent stake in Taiwan Sumida Electronics, a manufacturer of inverters used in notebook PCs, for ¥1.787 billion ($16 million) from its Tokyo-listed parent. Sumida Corporation, an electronics component manufacturer, said it would retain a 14.9 percent stake in its Taiwanese business.

H&Q Asia Pacific has a history of investing in the thin film transistor LCD industry. Shigeaki Koga, Tokyo-based managing director of H&Q, said the acquisition “highlights our core investment strategy in Japan. H&Q Asia Pacific has been successful at identifying key opportunities to migrate talented management teams and technology from Japan to Greater China to take advantage of the lower costs of manufacturing and engineering, and implement cross-border sales strategies to drive growth.”

Last September, H&Q was part of a consortium including FAT Capital and Merrill Lynch that took private Taiwan-listed Primax Electronics, a designer and supplier of scanners, computer peripherals and Bluetooth accessories in a transaction valued at $265 million.

Fidelity backs online manufacturing marketplace
Fidelity Ventures and Fidelity Asia Ventures have for the first time invested in the same deal, having co-led a $26 million financing round in online marketplace MFG.com.

“It’s actually the US, Europe and Asia [teams] working together and it’s because the company was founded in Atlanta, they acquired a company in Geneva, which was the basis for their European operations, and they launched organically in China,” Larry Chang, Fidelity Ventures partner, said in an interview.

Existing investor European Founders Fund also participated in the round, though another significant backer, Bezos Expeditions, the private investment arm of Amazon.com founder and chief executive Jeff Bezos, did not.

Chang said: “All three geographies are growing extraordinarily well, and I think part of the attraction for MFG.com partnering with us is that we have the resources and experience globally to understand what they’re doing. We were on the ground in Geneva, Atlanta and Shanghai within the span of a day or two as we decided to ramp up on this opportunity, and that’s sort of a rare attribute for our firm.” Though Fidelity’s various venture teams interact with one another very frequently on deals, Chang said, they don’t all participate in them in the way they did for MFG.com.

MFG.com is a means for buyers and sellers of manufactured parts to connect, and its users include large organisations like NASA.

HSBC buys into Indian software business
HSBC Private Equity Asia has invested R300 million ($7.6 million) from an Asia-focused venture fund for a minority stake in Newgen Software Technologies, a software company based in New Delhi. Newgen, which counts HSBC as a client, provides solutions for banking, financial services and insurance, business process outsourcing and telecommunications and government segments. The business is active in India, Middle East, Africa and Southeast Asia.

James Savage, investment director of HSBC Private Equity, said Newgen is the fourth Indian investment from the venture fund in the past three years. The $120 million technology-focussed fund closed in 2006 and can deploy between $3 million to $15 million for each investment.

Tasameem eats up dim sum restaurants
The property arm of the Abu Dhabi Investment Authority Tasameem has bought London restaurants Hakkasan and Yauatcha for $60 million. The Chinese restaurants were set up by Alan Yau, best-known as the founder of noodle chain Wagamama. Hakkasan and Yauatcha have received Michelin stars for their dim sums and are highly popular with fashion conscious wealthy Londoners. Tasameem is also partnering with Hard Rock International to build the first Hard Rock Hotel in Dubai. The $1 billion real estate project is due for completion by 2011.

Rasmala buys into private equity group
Rasmala Investments has acquired a 51 percent stake in Capital Industries & Investments, a Dubai-based private equity firm that focuses on investments in midsize construction-related manufacturing businesses.

CII plans to invest over AED1 billion ($272 million) in mature businesses and joint ventures in the MENA region over the coming year, according to a statement. Tamer Bazzari, partner and head of private equity at Rasmala, said CII “provides us with instant access to a very promising sector of the economy.”

Bazzari said: “With $2.4 trillion of announced construction projects in the GCC, there will be tremendous opportunities for well-managed companies specialised in this industry sector. Our decision to acquire a stake in CII was based on the recognisable milestones it has achieved, its successful investments, CII’s strong management team and an attractive pipeline of opportunities.”

CDH, Goldman team up again
CDH Investment and Goldman Sachs are joining up to invest $100 million into Shandong Himin Solar Energy Group, one of the largest solar water heater producers in China, according to a source close to the deal. The parties concerned signed an agreement on 13 January in the eastern Chinese city of Dezhou in Shandong Province to invest in one of the most popular themes for both private equity and venture groups seeking opportunities in the energy-guzzling country struggling to keep its pollution problems in check.

This is not the first time CDH and Goldman Sachs are teaming up in an investment. The two invested together in Henan Shuanghui, a Chinese meat and poultry business.

Consortium invests $1bn in Indian telecoms
A consortium including Singaporean sovereign fund Temasek Holdings, US bank Goldman Sachs and Australian bank Macquarie has invested $1billion for a stake in Bharti Infratel, an infrastructure subsidiary of Indian telecoms company Bharti Airtel. Asian buyout firm AIF Capital, US bank Citigroup, MENA buyout firm Millenium Private Equity and Indian firm India Equity Partners were also part of the syndicate. The telecoms subsidiary’s present enterprise value has been set at between $10 billion to $12.5 billion dependent on performance in 2008 and 2009.

Abraaj nets 75% IRR on internet deal
Abraaj Capital, a private equity firm specialising in investment in the Middle East, North Africa and South Asia region, has sold its stake in Maktoob.com, an internet portal, to hedge fund Tiger Global Management. The sale generated an internal rate of return in excess of 75 percent. Abraaj bought the stake in 2005 using capital from its buyout fund.

Founded in 2000 and headquartered in Amman, Jordan, Maktoob provides a variety of online services to millions of users, including Arabic-language auction site, Souq.com; Arabic-language search engine Araby.com; the matrimonial website, Bentelhalal.com; and Arabic and English web-based email and chat rooms. It was recently ranked as the 102nd most visited site on the internet globally.

According to Abraaj, the Maktoob exit follows the sales of ONIC Holding with an 84 percent IRR, Aramex’s 68 percent IRR exit and Amwal which recorded a 101 percent IRR. The firm said it expected to have divested almost all of the buyout fund’s remaining portfolio by 2008, making it a six-year cycle of completion at “very profitable terms to all our investors”.