DUBAI Bahrain's Investcorp INVB.BH INVBq.L said on Tuesday it planned to buy stakes in homegrown Middle Eastern luxury goods companies as part of a wider plan to invest $650 million in the region in the next two years.
Investcorp, previously an investor in high-end brands Gucci GUCG.PK and Tiffany (TIF.N), is in talks with families and businesses in the Gulf, North Africa and Turkey, said Azmat Taufique, co-head of the bank's Gulf Growth Capital business.
New investments under its $1 billion Gulf Opportunity Fund would strive to mirror a 70 percent acquisition last year of the Middle East's largest gold and jewelry maker, L'Azurde, which Investcorp made along with partners, Taufique said.
"We are looking at other businesses in the region with similar dynamics, not necessarily jewelry but broadly in mass luxury," Taufique told the Reuters Global Luxury Summit, adding he estimated the mass luxury market would grow about 10 percent a year in the region.
"We want to build brands that will resonate. The market is evolving, the region is growing up, and our business people and entrepreneurs have built brands," he said in Dubai.
L'Azurde was a strong investment because its products appeal to a wide section of the population, cater to a demographic of 16-40 year olds, are regarded as fashionable and play on a Middle Eastern cultural affinity for owning gold, Taufique said.
Bahrain-based Investcorp was in talks for acquisitions of companies with similar strategic characteristics in the broader mass luxury field, where some companies are seeking alternative funding sources, he said.
About a quarter of the eight to 10 acquisitions Investcorp intends to complete in the region in the next two years will be in the luxury goods segment, Taufique said.
The private equity firm is also exploring investments in European or Asian companies whose brands it could move to the Middle East, he added.
The Middle East has about 5 percent market share of the $300 billion global luxury business, Taufique said.
During the credit crunch that started late last year and has been felt across the region, some businesses have found difficulties securing loans from banks to finance new outlets and expansion plans.
In markets like Dubai, where the economy is suffering from a real estate sector crash and downturn in tourist visits, retailers have been pinched by lower sales this year.
But Taufique said luxury goods companies in the United Arab Emirates and markets like Saudi Arabia and Egypt, which boast large indigenous populations, exhibit strong medium-term growth prospects -- making them prime candidates for the fund.
"There are many companies, businesses not just in luxury that we are targeting.
"We are in the fortunate situation that we have a fairly strong dry powder base that we can invest into these businesses."
Saudi Arabia, the largest Arab economy, and Egypt are home to about 100 million people, compared with about 4.5 million in the UAE, known as a strong tourist and shopping destination.
Investcorp -- which also runs business lines including private equity in North America and technology in the West -- started its Gulf Opportunity Fund about three years ago to target growth in the world's biggest oil-exporting region.
(For summit blog: summitnotebook.reuters.com/)
(Additional reporting by Amena Bakr and Dania Saadi; editing by Mike Nesbit and Rupert Winchester)