January 31, 2019 / 6:28 PM / 17 days ago

UPDATE 1-Actis pushes for investor vote on Abraaj fund takeover

(Adds information from additional source)

By Tom Arnold and Saeed Azhar

DUBAI, Jan 31 (Reuters) - British private equity firm Actis plans to instigate an investor vote from next week on its proposed takeover of one of Abraaj’s biggest funds, seeking indemnity from potential legal claims against the Dubai buyout group, said a source close to Actis.

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.

A move by Actis to take control of Abraaj Private Equity Fund IV had hit a stumbling block as the British firm sought legal protection from any claims surrounding allegations of missing money, three sources close to the matter said earlier.

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 for the fund, originally valued at $1.6 billion.

Previously scheduled investor votes were pushed back, but Actis will begin a voting process from next week, said the source close to Actis.

The source said Actis already had the support of the largest limited partners for provision of indemnity against any legal claims and that the issue is surmountable because it would be manager of the fund rather than general partner.

SLOW PROGRESS

The slow progress, however, underscores the challenge facing Abraaj’s joint provisional liquidators in averting a disruptive break-up of the group’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, the three sources close to the matter 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.

One of the three sources said that 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 still needs that of the wider investor group, of which there are close to 80. The group is diverse, ranging from big Western funds to family offices and individual investors. (Editing by Ghaida Ghantous and David Goodman)

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