Standard Chartered’s private equity arm said on Monday that it had bought a stake in a subsidiary of Bin Laden Group, the construction group, in a vote of confidence in Saudi Arabia amid regional, economic, and political turmoil.
Standard Chartered Private Equity has paid $75m for a minority stake in Construction Product Holding Company, the kingdom’s largest manufacturer of building materials, the bank said on Monday.
“The company has a long record of growth and returns to shareholders and is well positioned to continue to be the leader in the Saudi Arabian market and also achieve its regional growth plans,” said Taimoor Labib, Standard Chartered’s head of Middle East and north Africa private equity.
Private equity fund managers have historically sought finance from wealthy Saudi families as a source of funding for investment overseas. In recent years, however, the country’s aggressive $400bn spending plans on infrastructure and economic liberalisation policies have encouraged private equity funds to seek stakes in Saudi companies.
Bin Laden Group is a beneficiary of the heavy infrastructure spending. Last week, Kingdom Holding, an investment vehicle for Prince Alwaleed bin Talal, announced that it was forming a partnership with Bin Laden Group to build the world’s tallest building near Jeddah.
But for private equity players, overvaluation, legal obstacles and finding an exit strategy are among the top challenges facing investors trying to tap into the Saudi market, experts say. Raising debt is uncertain and family companies often insist on selling only minority stakes, they say.
Only 24 private equity and venture capital deals were completed in the Middle East in 2010, down from 46 a year earlier, Dow Jones reported, citing a July report by the MENA Private Equity Association.
In the first half of this year, only seven private equity deals worth $25m were completed in the Middle East, down from 12 valued at $157m a year earlier, according to Zephyr, a research outfit that tracks mergers and acquisitions.
Still, investors are seeking investments in the kingdom. Cedar Bridge Partners, based in the United Arab Emirates, last month bought a stake in a Saudi healthcare company and Kohlberg Kravis Roberts has received a licence from the Saudi Capital Market Authority, the first awarded to an international private equity firm.
Last year, Carlyle acquired a 30 per cent stake in General Lighting, Saudi Arabia’s largest provider of lighting fixtures.