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Abu Dhabi, UAESunday 21 October 2018

Colony Capital said to hit headwinds over deal for Abraaj funds

Proposed deal in its original form could be put aside because of resistance from some investors, two sources said

Tom Barrack is the chief executive of Colony Capital. The firm may have to rethink its Abraaj strategy. AFP
Tom Barrack is the chief executive of Colony Capital. The firm may have to rethink its Abraaj strategy. AFP

US investment manager Colony Capital's deal to take control of four funds belonging to Dubai-based Abraaj is encountering investor resistance, four sources familiar with the matter said, piling further pressure on the embattled Middle East buyout firm.

Colony's offer last month to buy the fund management business that runs Abraaj's Latin America, Sub Saharan Africa, North Africa and Turkey funds followed months of turmoil caused by a dispute between Abraaj and four investors over the use of their money in a $1 billion healthcare fund.

Abraaj denies any wrongdoing but the dispute has weighed heavily on what is the largest private equity firm in the Middle East and Africa. Having managed almost $14bn in assets at its peak, Abraaj filed for provisional liquidation in the Cayman Islands last month.

Colony's proposed deal in its original form could be put aside because of resistance from some investors, two sources said without identifying specific aspects of the transaction.

“The issue is how the deal would be structured. Colony doesn’t want to do anything that does not have the full approval of the limited partners,” one of the sources said.

Colony Capital declined to comment.

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Read more:

Sharjah court adjourns hearing on Abraaj founder's bounced cheque case to July 11

Dubai Financial Services Authority to investigate Abraaj mismanagement claims

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The deal would need the approval of the Cayman Court and investors, known as limited partners, in the four Abraaj funds.

Commercial discussions are continuing but the deal could fall through because Abraaj has not provided some of the information required by Colony, another source said without elaborating.

Abraaj's joint provisional liquidators, Deloitte and PWC, said negotiations are still under way.

"Commercial discussions around the sale of the group’s fund management business continue. Any speculation to the contrary is without basis," they said in an emailed statement.

A Cayman Islands court will decide on July 11 whether to approve Colony Capital's deal, sources told Reuters last week.

One of those sources said that some fund investors had voiced concerns about the tight timeframe for closing the deal, which was announced on June 21.

Meanwhile, Abraaj founder Arif Naqvi is involved in a criminal case in the UAE for issuing a cheque without sufficient funds. On Thursday a UAE court adjourned the case until July 11.

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