BrazilEmbattled Abraaj in fresh talks to sell majority stake in investment arm.
In the latest development in the ongoing Abraaj saga, which has most recently seen Deloitte added to the list of auditors brought in by both sides of the investor dispute, reports have emerged that the Middle East buyout firm is in discussions to shed a majority stake in its newly-separated investment unit to U.S. asset managers Colony NorthStar.
The news follows reports from last month that Abu Dhabi sovereign investment fund Mubadala – which, with $125 billion in assets post-merger is the 14th largest such fund in the world – had pulled out of talks on the purchase amid an ongoing investigation into Abraaj’s books by forensic accounting firm Ankura Consulting – brought in by four disgruntled investors including the Bill and Melinda Gates Foundation and the World Bank’s International Finance Corporation.
Ankura was commissioned after the investors’ dissatisfaction with a previous report by KPMG which cleared the private equity firm of any impropriety over its alleged mishandling of funds allocated for healthcare projects in South Asia and Africa. The aggrieved parties contended that the expeditious KPMG audit, which was conducted in the space of a month, may have lacked the necessary rigour given the time-frame of its completion.
Abraaj has denied any fiscal wrong-doing concerning the disputed $1 billion healthcare fund – stating that the funds remain untouched and were simply unspent due to regulatory delays – and has in response to the Ankura appointment and KPMG report criticism hired Big Four rival Deloitte to carry out a second, separate examination, and more broadly a review of the beleaguered firm’s business, according to reports citing unnamed internal sources.
To date, the fallout from the affair has seen founder and CEO Arif Naqvi step down from the running of the fund along with other senior management shake-ups, while new investments have been suspended with a reported $3 billion in capital returned to investors. Further Abraaj assets are also are set to be off-loaded, including a stake in Egyptian school operator CIRA, along with the latest news that talks with a potential buyer for its Middlesex University’s Dubai campus investment have reached an advanced stage.
In addition, the Dubai-based firm – which is the Middle East’s biggest private equity entity – has hired US investment bank Houlihan Lokey in an effort to settle the dispute with its investors – which, as reported by the New York Times, revolves around a ~$270 million portion of the fund. The team from Deloitte, which is said to include specialists in forensic services, will now work with Abraaj to review the governance and control mechanisms in respect to the healthcare fund.
“We remain focused on working collaboratively with our investors and continuing to execute on the re-organisation of our firm to pave the way for continued long-term growth and value creation,” Abraaj said in statement to Reuters, “while also preserving the Fund’s vital mission of delivering affordable, accessible and quality healthcare to undeserved markets.”
