Dubai International Capital

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Dubai's transformation as a financial centre is perhaps best illustrated by the rise of Dubai International Capital (DIC). Just four years ago, Sameer Al Ansari was group chief financial officer for the Executive Office of HH Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President, Prime Minister and Ruler of Dubai, but in 2004 was involved in the establishment of both Dubai Holding and its private equity investment arm, DIC.

As CEO and executive chairman of DIC, he has been behind a sophisticated new approach to investment for sovereign wealth funds, which has been shown most recently in the firm's purchases of stakes in multinational giants EADS, HSBC Holding and Sony.

This rapid growth could have taken a knock following the US sub-prime crisis, which put the squeeze on debt markets, but Al Ansari says that it has not slowed DIC's progress.

"You can see from the announcements we've made over the past few weeks that it hasn't really affected us," he says. "We have announced deals worth US$3.8 bn. I would say the credit market is not closed, the credit market is still open to the right deals and the right sponsors.

"The only thing that's changed is banks are a little more careful, a little more conservative. They are giving, I would say, one notch less EBITDA (earnings before interest, tax, depreciation and amortisation) multiple than they were before.

"Debt is maybe a little bit more expensive, covenants are a little bit tighter than they were pre-July, but as an average weighted cost of capital I would say debt is not more expensive because LIBOR has come down in the meantime, so one thing has compensated for the other.

He is cautious about how the situation could develop in the future, since the Middle East has so far escaped the repercussions of the credit crisis. "Will it affect us going forward?" asks Al Ansari. "I guess it just depends on how bad things get.

"I think the region hasn't felt it yet, but will feel it pretty soon because I think the liquidity is just not going to be there for anything and everything. I'm hearing the sukuk market is quite tight now.

In recent months, DIC has acquired Almatis, a German producer of specialist alumina; UK-headquartered Alliance Medical, a provider of diagnostic imaging services throughout Europe; and Mauser, a specialist packaging company founded in Germany; and has purchased stakes in Japanese technology giant Sony and New York-based hedge fund Och-Ziff.

Looking at this list, it is hard to discern a pattern to DIC's investments. Al Ansari says that the firm does not want to specialise in any particular sectors at this moment, but looks for common factors when looking for acquisition targets. "We have not tried to invest in certain sectors: we have always taken an opportunistic approach," he says.

"In buyouts, what we look for are secondaries - companies that are already owned by private equity, that have good management teams, that have opportunities for growth, that are in the $1 billion to $2 billion enterprise value, where there is potentially an Asian story that we can help the management roll out.

Al Ansari adds: "Eventually as we build a much bigger portfolio I think we will find we'll end up with three or four sectors in which we are more comfortable, in which we have a better understanding, specialisation and so on, but in the early days that's pretty difficult to do.

"In any case, one of our key objectives is diversification.

DIC has an investment horizon of three to five years for most of its stakes, and has a particular interest in market leading companies that are under-performing.

So far, the firm has been happy to leave the management of its target companies in place.

Its purchase of a 10% stake in US hedge fund Och-Ziff Capital Management marks something of a departure for DIC, and could open up a whole new market. "Och Ziff takes us in a slightly different direction, but at the same time gives us all the things we need at exactly this point in time in our development," says Al Ansari.

"First of all, we believe this is an investment on which we are going to make money - we would not do it otherwise - but this is one of the largest hedge funds in the world, the first hedge fund in the world to go public, with a phenomenal track record, an excellent team with a fantastic reputation, resources across the world, offices in all of the countries we want to be in all over the world, with resources on the ground.

"It's a financial as well as a strategic relationship. It gives me access to all the things I need at this point in time to develop DIC.

The alliance should work both ways: DIC will have access to Och-Ziff's talent pool and deal flow, while the hedge fund will be able to call on DIC's access and networks in the Middle East.

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