ABRAAJ sells strategic stake in ONIC Holdings

The transaction took place on the MSM with Shua'a Capital - an investment bank listed on the Dubai and Kuwaiti bourses - purchasing the entire stake of 16.7 per cent from Abraaj at a price of RO 4.75 per share aggregating to over US$ 20 million.

Arif Masood Naqvi, executive vice-chairman and chief executive officer of ABRAAJ Capital, said: "ONIC has been an extremely sound and stable company for us to have invested in and we are delighted to have worked alongside the management, whose performance in improving the company's operations has been exemplary. We have exited ONIC with an IRR of 85 per cent having exceeded our initial investment target ahead of time". He noted that the company has excellent value going forward and was pleased to have sold its stake to another regional investment firm. "Shua'a Capital is not only committed to the long-term growth of ONIC but, we believe, will also provide a new impetus to the company and carry on from where we left off."

ABRAAJ Capital, one of the region's premier private equity firms, with an investment base of over $150 million, had acquired shares of ONIC through its Buyout Fund early in 2003.

Naqvi said that specialized private equity firms play an important role at various stages of a company's life by improving profitability, enhancing marketing and management abilities and generally supporting efficiency drives. He noted that ONIC was a clear example of this process being successfully applied.

Quoting interim results for the nine-month period to December 2003, Naqvi said that ONIC's earnings per share for the period went up to US$ 1.88 compared to US$ 1 for the previous full year, and its share price rose 96% whilst the overall Muscat Stock Market rose 41% during this period.

ONIC was the first exit from the Abraaj Buyout Fund, which also includes investments such as Aramex, Amwal Capital (formerly QLIC) in Qatar and Spinneys. Humayun Shahryar, executive director of Abraaj Capital, said that a number of further acquisitions are planned this year through the Buyout Fund. He added that the Fund will be fully or at least substantially invested by the end of the second quarter of 2004 and highlighted the fact that the private equity's executive directors have brought together some of the most compelling and successful investment track records in leveraged acquisitions across the Middle East. "Collectively, we have completed over US$ 350 million in MENA focussed private equity transactions, including the landmark leverage buyout of Inchcape, generating an IRR of over 35 per cent annually over the last nine years and 53 per cent in the last five years," he said.

Speaking about the role of private equity in the Middle East, Shirish Saraf, executive director of Abraaj Capital, said that the region has been witnessing a reverse flow of capital in the last few years. He felt that this flow of capital to the region would require diverse asset classes apart from good assets for parking. He said that private equity would play a pivotal role in this regard.

According to him, private equity will not only attract foreign capital and provide an investment vehicle for the capital returning back, but also help in stemming the capital flight from the region. Private equity like Abraaj would help the region's capital markets to deepen and become sophisticated with its offerings, while also providing investors with choice and alternatives for investments, he added.

Saraf also said that Abraaj has played the role of a responsible corporate stakeholder in the region by sponsoring such events as the World Economic Forum (WEF), which took place in the region for the first time in Jordan last year. Abraaj has renewed its sponsorship this year.