Blackstone chief eyes Middle East hub

Asa Fitch

• Last Updated: October 14. 2009 11:03PM UAE / October 14. 2009 7:03PM GMT

Blackstone Group, the world’s biggest private equity firm, plans to establish a Middle East presence and increase investment in the region as the global economy recovers.
The world economy is showing “more than green shoots”, said Steven Schwarzman, the chief executive of Blackstone, which has more than US$93 billion (Dh341.5bn) under management. He made his remarks yesterday as a leading global index of stocks hit a high for this year.

“At least for private equity, the worst is behind the industry and there is a positive outcome for the future,” Mr Schwarzman told the Super Return Middle East private equity conference in Dubai.

“The revenues of most [of Blackstone’s] portfolio companies are no longer declining and it looks as if a bottom has been reached.”

Blackstone is “open to invest in the region”, given recent global economic improvements and the relatively high price of oil, which has kept petrodollars flowing into the coffers of the region’s sovereign wealth funds, Mr Schwarzman said. Those funds include the Abu Dhabi Investment Authority, which is estimated to control more than $300bn in assets.

The US-based firm plans to open an office in the region, Mr Schwarzman said, although he declined to give details on timing or location.

Blackstone and other private equity firms have been given a boost by rising stock prices, which have reignited investor appetite for initial public offerings (IPOs) of stock. IPOs are a common way for private equity firms to sell off investments at a profit, but sizeable gains are possible only when markets are on an upwards trend.

Global markets continued their gains yesterday, as the MSCI all-country world index climbed to levels not seen since last October.

Blackstone has registered to list shares in one of its companies and is considering going public with seven more, Mr Schwarzman said.

There have been recent signs that the Gulf, too, might be on its way to faster growth. The IMF early this month revised upwards its GDP projections for the region next year, bolstered by oil prices above $70 per barrel.

Howard Handy, the chief economist at Samba Financial Group in Saudi Arabia, said in a report yesterday that while Gulf economies still faced significant challenges, “the economic downturn is likely to bottom out this year”.

Blackstone would become only the latest major private equity player to raise its profile in the region in recent years.

The Carlyle Group moved into the region in 2007, establishing offices in Dubai, Cairo and Istanbul. And Kohlberg Kravis Roberts opened an office in the Dubai International Financial Centre in May.

Mr Schwarzman said a significant part of Blackstone’s activity focused on sovereign wealth funds. Such funds, he said, were growing more prepared to deploy money on new investments, including private equity, as the world mounted a recovery from a prolonged recession.

“They are becoming increasingly comfortable with commitments for the future, although many of them are currently in the process of evaluating that type of decision,” he said.

“In comparison, six months ago the vast majority of those investors were completely out of the market, and that is changing.”

While the region has not historically been a “robust area” for private equity, as companies in the Gulf increasingly look to raise foreign capital and expand internationally more opportunities may present themselves for firms like Blackstone, he said.

“It will be somewhat difficult to deploy large amounts of private equity in the region given the [oil-based] surplus nature of the region,” he said. “That does not mean that there won’t be some opportunities, and particularly there may be opportunities to invest with companies in the region that want to expand outside.”

afitch@thenational.ae