Resistance to ‘Abraaj’ deal

DUBAI, July 5, (RTRS): US investment manager Colony Capital’s deal to take control of four funds belonging to Dubaibased Abraaj is encountering investor resistance, four sources familiar with the matter said, piling further pressure on the embattled Middle East buyout firm.

Colony’s offer last month to buy the fund management business that runs Abraaj’s Latin America, Sub Saharan Africa, North Africa and Turkey funds followed months of turmoil caused by a dispute between Abraaj and four investors over the use of their money in a $1 billion healthcare fund.

Abraaj denies any wrongdoing but the dispute has weighed heavily on what is the largest private equity firm in the Middle East and Africa. Having managed almost $14 billion in assets at its peak, Abraaj filed for provisional liquidation in the Cayman Islands last month.

Colony’s proposed deal in its original form could be put aside because of resistance from some investors, two sources said without identifying specific aspects of the transaction.

“The issue is how the deal would be structured. Colony doesn’t want to do anything

that does not have the full approval of the limited partners,” one of the sources said.

Colony Capital declined to comment.

The deal would need the approval of the Cayman Court and investors, known as limited partners, in the four Abraaj funds.

Commercial discussions are con-

tinuing but the deal could fall through because Abraaj has not provided some of the information required by Colony, another source said without elaborating.

Abraaj’s joint provisional liquidators, Deloitte and PWC, said negotiations are still under way.

“Commercial discussions around the sale of the group’s fund management business continue. Any speculation to the contrary is without basis,” they said in an emailed statement.

A Cayman Islands court will decide on July 11 whether to approve Colony Capital’s deal, sources told Reuters last week.

One of those sources said that some fund investors had voiced concerns about the tight timeframe for closing the deal, which was announced on June 21.

Meanwhile, Abraaj founder Arif Naqvi is involved in a criminal case in the United Arab Emirates for issuing a cheque without sufficient funds. On Thursday a UAE court adjourned the case until July 11.

The court case in Sharjah, one of the United Arab Emirates, relates to a cheque for 177.1 million dirhams ($48 million), signed by Naqvi and a fellow executive, and written to Hamid Jafar, another founding shareholder in Dubai-based Abraaj, according to a prosecution document.

Khalid al-Bannay, from Al Tamimi & Co, the law firm representing Jafar, said the court has adjourned the case until July 11.

Naqvi’s lawyer told Reuters that the adjournment was an opportunity for both sides to reach an understanding.

“The adjournment has given an opportunity to reach a deal,” Habib alMulla, the lawyer representing Naqvi, said.

“Before July 11 there could be a settlement agreed.”

Jafar’s lawyer al-Bannay said: “Until now there is no agreement and to have one, we need at least an initiative from the defendants.”

The court case in Sharjah is another challenge for the founder of Abraaj, which is battling allegations that it misused investor money in a healthcare fund. The firm has denied these allegations.

Naqvi is the single biggest shareholder of Abraaj Holdings which owns the investment management business, partly being sold to US buyout firm Colony Capital.

Abraaj, the Middle East and North Africa’s biggest private equity firm, has filed for provisional liquidation in the Cayman Islands.