Exclusive: Growing support for ADFG's revised bid for Abraaj's Middle East funds

A prominent investor told Arabian Business that he considers ADFG 'the natural selection'
Exclusive: Growing support for ADFG's revised bid for Abraaj's Middle East funds
Support is growing for a revised $27 million bid from Abu Dhabi Financial Group (ADFG) to acquire the management rights to the Middle East funds of embattled private equity firm Abraaj, according to the ADFG and people familiar with the matter.
By Bernd Debusmann Jr
Wed 19 Sep 2018 10:24 AM

Support is growing for a revised $27 million bid from Abu Dhabi Financial Group (ADFG) to acquire the management rights to the Middle East funds of embattled private equity firm Abraaj, according to the ADFG and people familiar with the matter.

ADFG is among more than a dozen bidders seeking to buy the majority of Abraaj’s private equity funds.

Abraaj has 10 Middle East funds with approximately 200 investors from around the world.

Earlier this week, it was reported that a $1 bid from Actis is favoured by investors in the funds, despite higher offers.

In a statement to Arabian Business, however, ADFG said it considers the bidding process “a very open competition.”

According to a statement ADFG, the revised proposal is “well placed” to secure approval from the investors, and sets aside specific amounts from ADFG to cover forensic auditing, litigation finance, a credit facility in case of cash shortfalls, and a facility to cover any fund manager liabilities – meaning that there would be a zero capital requirement from the 200 unique investors in Abraaj’s Middle East funds.

A letter sent to LPs (investors) and seen by Arabian Business, said that the ADFG offer has been revised to $27 million, including a $7 million cash payment on closing. Of this, $6 million is earmarked for funding the forensic audit and the pursuit of any legal claims that arise from it.

The letter also includes a commitment of $10 million towards liquidity support and working capital to the management of the funds after closing, as well as the assumption of the related employee severance costs of transferring employees.

The revised bid also includes a credit facility of $10 million to fund any short-term cash shortfall in the selected funds operations.

“ADFG has submitted a superior bid and we are confident that it will resonate with all stakeholders, i.e. limited partners, the creditors and the shareholders,” an ADFG spokesperson told Arabian Business.

“With support from major LPs, we believe that we are well placed to take on and revitalise Abraaj’s Middle East funds.

“We have received very favourable response to our bid from the LPs of the legacy funds,” the spokesperson added. “We hope to secure this mandate at the mandate at the earliest in order to start the forensics, value recovery and investment exist process outlined in our bid.”

A number of LPs have indicated their support for the ADFG proposal.

“ADFG is the natural selection. They are from the region, understand it properly, can pull strings and have the hard and soft infrastructure to turn the Abraaj situation around for us [the LPs],” said a prominent LP with interests in more than eight Abraaj funds and special purpose vehicles.

“They are one of the very few regional money managers that are growing steadily and confidently in the region with the necessary scale.”

The LP added that ADFG “would be amongst the very few that would put a value on the relationship with the LP as we are their natural target.”

“Their proposal is the obvious choice, especially for the Middle East funds,” he said. “Besides, their bid has very sensibly removed some of the significant risks that concern us. I wish they could take the whole thing, to tell you the truth.”

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