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Thu 21 Jun 2018 09:19 AM

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Abraaj to sell some key funds to US asset manager Colony Capital

Colony Capital reached an initial agreement to acquire Abraaj's Latin America, sub-Saharan Africa, North Africa and Turkey funds management businesss, as well as its limited partnership interests in the underlying funds

Abraaj to sell some key funds to US asset manager Colony Capital
Colony Capital Executive Chairman Tom Barrack

Colony Capital agreed to buy some of Abraaj’s key funds and oversee others as the Dubai-based private equity firm attempts a court-supervised restructuring amid allegations of misused funds.

The US asset manager reached an initial agreement to acquire Abraaj’s Latin America, sub-Saharan Africa, North Africa and Turkey funds management business, as well as its limited partnership interests in the underlying funds, Abraaj said in an emailed statement without mentioning the value of the deal.

Staff in eight offices will be transferred as part of the agreement.

Colony also agreed to oversee other Abraaj funds on an interim basis so the buyout firm and its stakeholders “have a comprehensive global solution in place.”

The agreement has received in principle regulatory approval and is expected to be completed by July 1.

“We are delighted to have crafted this comprehensive global solution for Abraaj and its stakeholders and sincerely hope that this can enable the process of rebuilding on all sides and also bring an end to the speculation that has swirled around Abraaj over the last months,” Colony Capital executive chairman Tom Barrack said in the statement.

Abraaj, once one of the developing world’s most influential investors, this week said a court in Cayman Islands appointed provisional liquidators for its holdings and investment management units.

The move comes less than five months after some of its investors, including the Bill & Melinda Gates Foundation, commissioned an audit to investigate the alleged mismanagement of money in Abraaj’s healthcare fund.

Colony Capital agreed to buy some of Abraaj Group’s key funds and oversee others as the Dubai-based private-equity firm attempts a court-supervised restructuring amid allegations of misused funds.

The US asset manager reached an initial agreement to acquire Abraaj’s Latin American, sub-Saharan African, North African and Turkey fund-management businesses, as well as its limited-partnership interests in the underlying funds, Abraaj said in an emailed statement. Staff in eight offices will be transferred as part of the pact.

Abraaj, once one of the developing world’s most influential investors, this week said a court in Cayman Islands appointed provisional liquidators for its holdings and investment management units.

The move comes less than five months after some of its investors, including the Bill & Melinda Gates Foundation, commissioned an audit to investigate the alleged mismanagement of money in Abraaj’s healthcare fund.

Colony Capital also agreed to oversee other Abraaj funds on an interim basis. The deal has received in principle regulatory approval and is expected to be completed by July 1.

‘Global Solution’

The funds acquired by Colony Capital include the Abraaj Africa Fund III, which has assets of $990 million, the Abraaj North Africa Fund II with assets of $375 million, the Abraaj Turkey Fund I with $526 million and the Abraaj Latin America Fund II, which has assets of $545 million, according to an Abraaj Group spokeswoman. She declined to comment on the value of the deal.

“We’re delighted to have crafted this comprehensive global solution for Abraaj and its stakeholders and sincerely hope that this can enable the process of rebuilding on all sides,” Colony Capital Executive Chairman Tom Barrack said in the statement.

The money manager also acquired the earlier generation of funds associated with these regions, the assets of which were not disclosed.

Colony Capital ended talks to buy a majority stake in Abraaj’s fund-management unit after its due diligence efforts raised concerns about the company, people familiar with the matter said less than a month ago. While Abraaj’s founder Arif Naqvi ceded control of the firm’s fund-management business in February, he is still the chief executive officer of Abraaj Holdings.

Health fund

A review of Abraaj’s finances found that there was commingling of Abraaj’s own money in the health-care fund and its fourth private-equity fund, according to a summary of a report by Deloitte that was presented to creditors on June 4 and seen by Bloomberg News.

Abraaj still owes $94.6 million to its so-called Private Equity Fund IV, but all the money has been accounted for and there’s no evidence of embezzlement or misappropriation, according to the report.

AlixPartners LLP is expected to be formally appointed as interim manager of the $1 billion healthcare fund and the fund’s limited partners will decide on a permanent arrangement, according to people familiar with the matter who asked not to be identified.buy a majority stake in Abraaj’s fund-management unit after its due diligence efforts raised concerns about the company, people familiar with the matter said less than a month ago.

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