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UK investment paves way for private equity flurry

3i becomes first ever foreign firm to invest in Gulf private equity fund

A UK company has become the first foreign private equity (PE) firm to lay down a multimillion-dollar investment in a GCC fund, paving the way for a flurry of PE activity over the coming months.

3i, a world leader in private equity and venture capital, committed US $15 million (AED55 million) to Ithmar Capital, the Gulf-based private equity firm, which is currently raising its second fund, Ithmar Fund II.

The strategic alliance between 3i and Ithmar is the first example of a foreign private equity firm’s participation in a GCC fund and builds on 3i’s strategy to expand its international network into high growth territories. It also adds value to its huge US $10 billion portfolio and enables the UK business to gain exposure to new markets.

Paul Waller, a member of 3i’s group management committee and an advisor to Ithmar Capital’s investment committee, said that the alliance underscored “growing international investor appetite for the Middle East and particularly the surging Gulf economies”.

Interviewed for the first time in CEO Middle East in February this year, Ithmar Capital’s founder and managing partner, Faisal bin Juma Belhoul, predicted that Fund II would raise US $150 million. The fund is now expected to be substantially oversubscribed and almost double reaching US $250 million.

“The expansion in fund size is not only due to high investor demand but, more fundamentally, due to the larger deal sizes that we have been witnessing over the past 12 months,” Belhoul told CEO Middle East. “Of the many opportunities in the region, Fund II will ideally finance around two to three of the best businesses a year with enterprise values of between US $15 million and US $500 million,” he added.

Ithmar’s debut fund, Ithmar Fund I raised US $70 million and is 100% owned by the Belhoul family. Ithmar Fund II focuses on growth capital and buyout investments in various ‘attractive’ sectors from the six high growth GCC markets including the UAE, Kuwait, Qatar, Bahrain, Oman and Saudi Arabia and is 10% owned by the family.

“3i’s portfolio companies, like NCP, Hobbs and SR Technics, are increasingly interested in expansion opportunities in this region,” added Waller. “3i’s partnership with Ithmar Capital, a leading GCC private equity firm, enables us to help the companies we back to gain exposure to this important growth market in the best possible way.”

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