Dubai: Private equity firm Gulf Capital has bought Saudi Arabian food and drinks distributor Multibrands and plans to spend around $250 million this year across mainly defensive sectors, its CEO said on Tuesday.
“We have a record deal flow and expect two or three more deals in 2016 and are looking at defensive sectors such as health care and business services, as well as energy,” Karim El Solh said.
“We are very optimistic as we have $1 billion in dry powder and today is the perfect time to be scouting [for deals] as there are more opportunities and valuations are coming down.” Abu-Dhabi-based Gulf Capital bought Multibrands from Kuwaiti businessman Fozan Al Fozan for an undisclosed price.
With Multibrands, Gulf Capital, which manages more than Dh13 billion of assets, is seeking to tap into one of the largest and fastest growing non-oil sectors in Saudi Arabia. The food and beverage sector is expected to grow from around $56 billion currently to $83 billion by 2020, Gulf Capital estimated.
It is Gulf Capital’s second large food and beverage deal. In 2013, it bought Dubai-based Chef Middle East, an importer and distributor of food products.
Solh said more companies were turning to private equity for money because of tighter bank liquidity and tepid conditions in the market for initial public offerings in the region.
Low oil prices have reduced money flows into the economy, pushing up bank borrowing costs, while investor confidence in equity markets has been sapped by volatility.
Gulf Capital, one of the biggest private equity firms in the region, would use $1 billion it had raised over the last two years across its private equity and private debt funds to finance future investments. Solh said the company did not need to tap capital markets as it was sufficiently funded.
Gulf Capital had been considering an initial public offering, but any such move would likely not happen for at least two or three years until market conditions improved, Solh said.
