Abu Dhabi fund moves on Abraaj asset management business

Abraaj founder and chief executive Arif Naqvi stepped aside from day-to-day running of its private equity fund unit after the dispute went public early this year. (Courtesy World Economic Forum)
Updated 19 June 2018
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Abu Dhabi fund moves on Abraaj asset management business

LONDON: Abu Dhabi Financial Group has emerged as a bidder for the asset management business of Abraaj, the Dubai-based private equity firm that has filed for provisional voluntary liquidation.

Reports of the bid emerged as the fallout from the firm’s collapse spreads across the region’s financial sector with airline Air Arabia revealing it is an investor in the buyout firm.

ADFG, the alternative asset management firm that specializes in distressed assets, made a conditional offer for $50 million, via its subsidiary Abu Dhabi Capital Management, according to a document reviewed by Reuters.

The offer comes in below an offer of $125 million made by New York-based private equity firm Cerberus Capital Management, made ahead of Abraaj’s decision to file for provisional liquidation in the Cayman Islands last week, and indicates the extent of the firm’s spectacular fall from grace.

The terms of the offer were unclear, and it is not known to what extent they differ from those in Cerebrus’ offer.

ADFG declined to comment on the report when contacted by Arab News. The UAE-based firm’s other investments include shareholdings in Dubai’s Shuaa Capital, Sharjah’s Dana Gas, and embattled Singapore trading firm Noble.

The offer for Abraaj comes as the impact of the firm’s collapse continues to create waves across the region’s financial sector.

The region’s banking system is unlikely to be severely impacted by Abraaj’s woes, with banking creditors all secured lenders, said Jaap Meijer, managing director of equity research at Arqaam Capital in Dubai.

“Some other companies have invested in Abraaj funds, but it is yet uncertain if those end up with losses,” he told Arab News.

Air Arabia shares hit an 11-year low on Monday, after it emerged its investment portfolio was exposed to Abraaj funds.

“Air Arabia has appointed a team of experts who are actively engaged with all stakeholders and creditors involved with the matter to ensure Air Arabia’s investment and business interest is protected,” the airline said in a statement of the Dubai Financial Market on Tuesday.

The carrier’s shares, the most traded stock on the Dubai bourse, ended the day unchanged on Tuesday.

The court-driven restructuring process, initiated by Abraaj may be a boon for capital markets in the region, if the firm is forced to sell assets as part of the process, said Meijer.

But alternative investment firms in the region are likely to be negatively impacted by the firm’s woes, he said.

“(The fallout from Abraaj) will reduce the appetite for new VC or PE funds though and could hurt new start ups and pre-IPO financing,” he predicted.

Abu Dhabi-based investment firm Waha Capital has abandoned plans to raise a $300 million private equity fund, with investor demand falling in the wake of the Abraaj saga, Reuters reported.

The company’s shares fell to their lowest level in nearly six weeks on Monday, before recovering strongly on Tuesday.

Earlier this month, Gateway Partners CEO V. Shankar told Arab News that while his Dubai-based firm had not been affected, international investors previously interested in the region’s PE sector had taken fright, describing the EM space as “like the aftermath of a terrorist attack.”

Abraaj — which at one point handled assets worth nearly $14 billion — filed for provisional voluntary liquidation of its holding company in the Cayman Islands last week, amid reports of unpaid debts and allegations of financial mismanagement.

The application by Abraaj — which was formally approved by a Cayman court on Tuesday — was designed to head off a petition to wind up the holding company, brought by Kuwait’s Public Institution for Social Security, following missed payments on a $100 million loan.

Abraaj founder Arif Naqvi said last week that he expected the court-supervised restructuring process to take “a few months.”

Reports of mismanagement have dogged the company since February, when it was reported that investors in an Abraaj health care fund — including the Bill & Melinda Gates Foundation and the World Bank’s International Finance Corporation — had hired forensic accountants over concerns about the whereabouts of money they had committed.

Last week an investigation conducted by Deloitte found that Abraaj had commingled about $95 million worth of funds due to a cash shortage, but found no evidence of embezzlement.


Angry Birds maker Rovio needs new games to revitalize sales

Updated 3 min 44 sec ago
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Angry Birds maker Rovio needs new games to revitalize sales

  • Rovio said tough competition and high marketing costs would put pressure on its full-year outlook
  • Rovio grew rapidly after the 2009 launch of the original ‘Angry Birds’ game
HELSINKI: Rovio Entertainment, the maker of the “Angry Birds” mobile game, on Friday said the company needed to come up with new games to drive growth and warned that sales would fall this year after reporting higher third-quarter profits.
The Finnish company, which listed its shares on the stock market in Helsinki last year, reported third-quarter adjusted operating profit of €10.4 million ($11.8 million), up from €4 million a year ago.
But Rovio said tough competition and high marketing costs would put pressure on its full-year outlook. The group said it expected 2018 sales to be between €280 million and €290 million, compared with a previous range of €260 million and €300 million. Last year, the company had revenues of €297 million.
“It is clear that we need new games in order to accelerate growth,” Rovio’s Chief Executive Kati Levoranta said in a statement, adding that the company planned to launch at least two new games next year and had another ten projects in the pipeline.
Rovio grew rapidly after the 2009 launch of the original “Angry Birds” game, in which players used slingshots to attack pigs who stole birds’ eggs. The company expanded into film with an Angry Birds movie in 2016, but more recently has been hit by its high dependency on the Angry Birds brand and tough competition.
After its initial public offering in September 2017, Rovio’s shares dropped 50 percent in February after the company said its sales could fall this year after 55 percent growth in 2017.
Rovio expects a movie sequel to boost business next year and the company has also stepped up investments in its spin-off company Hatch, which is building a Netflix-style streaming service for mobile games.
Full-year core operating profit margin is seen at 10-11 percent, up from a previous view of 9-11 percent.