Wednesday, October 15, 2014

CDC Worries: Carlyle Axes North Africa-Middle East Fund

(Persian) Gulf News reported:

Carlyle has shelved plans to market a second private equity fund targeting the Middle East and North Africa.

CDC Chief Tom Frieden said just days ago:

“I’ve spoken with business leaders who’ve emphasized to me that there’s so many misconceptions about Ebola that they’re already seeing things like a reduction in investment in parts of Africa that are not in any way, shape or form involved in the Ebola outbreak.” 
Timing of the cancellation is interesting in light of Carlyle's returns on its first Middle East North Africa fund.

Carlyle’s first $500m (Dh1.8 billion) private equity fund for the region was raised in 2007 and ran out of money earlier this year. It was generating a 35 per cent cumulative gain as of September, before fees, according to investors.
Carlyle's logic in targeting the region is:
We believe the MENA region is large, growing rapidly and ripe for private equity investing:
  • Economy has world’s fifth largest GDP (growth projections through 2010 are 55% higher than rest of the world and 76% greater than the U.S.)
  • Population is world’s third largest at 426 million
  • Capital markets are maturing and large enough to provide exit opportunities
  • Liberalizing state agendas creating opportunities for large scale transactions (increasing large scale privatizations)
  • Low private equity penetration
  • Carlyle’s regional presence provides opportunity for cross-country investments and M&A within the MENA region
Carlye stubbed its toe with the bankruptcy of Carlyle Capital Corporation.  Kuwaiti investors sued Carlyle for selling the highly leveraged mortgage backed security fund as virtually risk free.  That case is yet to be heard.  

It interesting the timing between Frieden's Ebola investment concern and Carlyle's cancellation.  Was there a White House intermediary?