January 31, 2019 / 2:56 PM / 6 months ago

Actis hits stumbling block in bid for Abraaj fund -sources

DUBAI, Jan 31 (Reuters) - British private equity firm Actis has hit a stumbling block in its bid to take over one of Abraaj’s biggest funds as it seeks indemnity from future potential legal claims against the Dubai buyout group, three sources close to the matter told Reuters.

Abraaj was the largest buyout fund in the Middle East and North Africa until it collapsed last year after fallout from a row with investors, including the Gates Foundation, over the use of their money in a $1 billion healthcare fund.

Actis, which has about $7.8 billion invested globally, has been in talks since at least October to reach the required threshold of 75 percent of investor support for its bid to take control of Abraaj Private Equity Fund IV, originally valued at $1.6 billion.

Actis declined to comment.

The slow progress underscores the challenge facing Abraaj’s joint provisional liquidators in averting a disruptive break-up of Abraaj’s $13.6 billion empire. So far only two of Abraaj’s funds, focused on Latin America and healthcare, are known to have found new managers.

A failure to secure a new manager for APEF IV would lead to a dilution of the fund’s value and its eventual liquidation, two of the sources said.

One of the reasons for the delay has been discussions around giving London-based Actis indemnity in case of future lawsuits or claims relating to Abraaj from investors in APEF IV, they said.

Indemnity clauses are common practice in acquisition deals where the buyer wants protection from potential risks, but the talks on APEF IV been complicated by alleged misuse of money within the fund by Abraaj.

Separate forensic audits by Deloitte and Alvarez & Marsal are reviewing allegations of missing money from the fund, which sources have estimated could amount to about $500 million.

Abraaj Holdings and Abraaj Investment Management filed for provisional liquidation in the Cayman Islands in June and their court-appointed joint provisional liquidators, Deloitte and PwC, are overseeing the restructuring of Abraaj’s debt.

Deloitte declined to comment.

Actis, which is also in line to take over Abraaj’s Africa and South East Asia funds, has the support of the 10 largest limited partners but it needs support of the wider investor group, of which there are close to 80, one of the sources said.

One of the obstacles, the source added, is the wide diversity of investors, ranging from big Western funds to family offices and individual investors.

Editing by David Goodman

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