Investcorp

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Investcorp
Type Public (BSE: INVCORP)
Founded 1982
Headquarters Manama, Bahrain
Key people Nemir A. Kirdar,
Executive Chairman & CEO
Rishi Kapoor,
Chief Financial Officer
Products Alternative investment, buyouts, hedge funds, real estate
Total assets $11.86 billion
Website Official website

Investcorp is a manager of alternative investment products, for private and institutional clients.[1] Its principal client base is in the six countries of the Gulf Co-operation Council,[2] but it also has institutional clients in North America and Europe.[3] It has offices in New York City, Bahrain and London.

The company offers investments in corporate investment, real estate and hedge funds, and has arranged investments with a combined value of approximately $44 billion.[citation needed] It typically places the private equity of companies and real estate properties it acquires directly with investors on a deal-by-deal basis, rather than through a fund structure. In addition, the firm operates the Gulf Opportunity Fund investing in the MENA region,[4] and a number of technology[5] funds.

The company was founded in 1982 as a corporate and real estate investment firm, and diversified in 1997 into hedge funds.[6] Non-Gulf investors, mainly in the US, now account for around two-thirds of Investcorp’s hedge fund client assets under management, with $1 billion in new US hedge fund mandates being secured in 2009.[7](subscription required)

Investcorp currently has approximately $12 billion in invested assets under management across its three asset classes.[citation needed] In 2011, it ranked 67th in the PEI300 (Private Equity Index 300) ranking of private equity firms by assets deployed, with $4.68bn invested in private equity over the previous five years.[8](subscription required)

The company maintains relationships with over 1,000 individual and institutional investors in the Gulf.[9][not in citation given] The company is regulated in Bahrain as a wholesale bank, and has traditionally utilised long-term and medium-term bank financing, including private placements and syndicated loans, in order to ensure a longer maturity profile.[citation needed] The company’s capital adequacy ratio (Basel II) at 2012 year end was 22.9%.[citation needed] The company is listed on the Bahrain Bourse (BSE), with a financial year end of 30 June.

Investcorp's portfolio company, Moneybookers, ended its relationship with Wikileaks in August 2010 as a direct result of U.S. government pressure.[citation needed]

Investment areas[edit]

Corporate investment[edit]

Corporate investment is Investcorp's traditional activity. This includes mid-size companies in North America and Western Europe, as well as technology small-cap investment (through Investcorp Technology Partners)[5] in the Gulf and the MENA region.

The past and present portfolio includes over 90 investments.[citation needed] Selected past investments include:

  • Tiffany & Co. - retailers of jewelry and luxury goods - acquired 1984, floated 1987
  • Gucci - designer, producer and distributor of luxury accessories and apparel - acquired from 1989 to 1993, floated 1996
  • Leica Geosystems - measuring instrument manufacturer acquired 1998, floated 2000
  • Jostens - US provider of school-related affinity products - acquired 2000, sold 2003
  • Neptune Technology Group – US manufacturer of water meters – acquired 2001, sold 2003[10]
  • MW Manufacturers – a US maker of windows and patio doors – acquired 2002, sold 2004[11]
  • Hilding Anders – European mattress and bed manufacturer – acquired 2003, sold 2006[12]
  • Apcoa – European parking management providers – acquired 2004, sold 2007[13]
  • American Tire Distributors - the largest US independent tire distributor – acquired in 2005, sold in 2010[14]
  • Moody International - international provider of quality and safety services – acquired 2007, sold 2011[15]
  • FleetPride - North America's largest distributor of truck and trailer parts - acquired 2006, sold 2012[16]

Real estate investment[edit]

The real estate division[17] based in New York, sources and performs due diligence, and arranges financing and the acquisition of US properties and US commercial mortgage debt positions. The investment in these properties or loans is typically aggregated into a series of multi-investment portfolios for placement to clients. Debt investments are also made within a series of debt funds which are managed by the group.[18] Since 1995, Investcorp has acquired in the region of 200 properties, totaling approximately $10 billion in value. It currently has more than $6 billion of property under management.[citation needed]

Hedge funds[edit]

Investcorp's hedge funds business was established in 1996 and today has approximately $4.5 billion of capital under management, of which approximately $0.6 billion is reserved for proprietary investments.[citation needed] The fund of funds program comprises a selection of funds of hedge funds with varying risk/return profiles. These are invested across different strategies through approximately 45 hedge fund managers.[19]

In addition Investcorp has developed a single manager seeding platform, and currently offers, on a joint venture basis, access to six managers with specific strategies. The single manager platform currently has around $1.8 billion in client and proprietary assets under management.[20] In the last few years customised portfolios have grown as a proportion of the firm’s overall hedge fund assets under management, with traditional fund-of-funds reducing.[21](subscription required)

16% of the hedge fund business is invested through fund of funds.[22] The remainder is invested through customized investments, seeding businesses and a single manager platform. The hedge fund business also provides institutional investors with access to its emerging manager program, investing with and seeding early stage managers who, according to Investcorp research, outperform larger hedge funds on a risk adjusted basis.[23]

History[edit]

Investcorp was founded in 1982. The concept behind the creation of Investcorp was devised and implemented at the Arab Monetary Fund (AMF) during the period 1980–1982, when Dr. Jawad Hashim was its President.[citation needed] In July 1980 Hashim employed Nemir Kirdar as one of his advisors on one-year secondment from Chase Manhattan Bank. Initially, Kirdar’s task was to prepare certain feasibility studies in connection with the development of Arab financial markets, promotion of Arab monetary and economic integration and the quest for investment opportunities for the surplus of the oil-exporting Arab countries. Kirdar delivered a report entitled: ARAB MONETARY FUND PROJECT: ESTABLISHMENT OF A PRIVATE INVESTMENT COMPANY.[24] Under the auspices of AMF and on its expense, a new financial institution, Investcorp, was created in 1981/1982. Kirdar would later assert that Investcorp was his “brainchild” without reference to the AMF's role in its creation.[25] To pay for his share subscription in Investcorp, Kirdar requested a second loan for US$600,000 from Dr. Hashim in March 1981.[26]

Investcorp's first Board Directors, with Dr. Jawad Hashim (appearing in the back row, third from left) and Nemir Kirdar (appearing in the front row, on the right)

The establishment of Investcorp commenced in May 1981 with the first founding shareholders subscribing and affecting payments on May 13, 1981. By March 31, 1982, all committed founding shareholders had subscribed and paid their funds. In May 1982, the public subscription was conducted and in June 1982, a general shareholders meeting was convened and the shareholders elected the first Board of Directors. In July 1982, the final incorporation process was completed and Investcorp started to develop its policies and procedures manuals, background material and logistical requirements and had begun to hire its staff. In January 1983, Investcorp commenced business operations.

On an official visit to Abu Dhabi in early 1977 (in his capacity as Presidential Advisor) to deliver a letter from Saddam Hussein to the then President of United Arab Emirates, Dr. Hashim met Nemir Kirdar at a dinner party. When Hashim assumed his post as President of AMF, Nemir Kirdar, as the representative of Chase Manhattan Bank discussed mainly the banking relationship between AMF and Chase Manhattan. Hashim also used to outline the objectives of the AMF in relation to the promotion of Arab capital markets and best ways of utilizing the financial surpluses of the Persian Gulf region through a viable investment entity.

In the Summer of 1979, Dr. Hashim paid an official visit to Bahrain. During this visit, he met with Nemir Kirdar at Chase Manhattan Bank. On this occasion Dr. Hashim again discussed his “dream investment vehicle” with Mr. Kirdar, asking if he would join the AMF staff to undertake a detailed feasibility study on the matter. Dr. Hashim approached the chairman of Chase Manhattan, David Rockefeller, to second Kirdar for a period of one year. Again, Kirdar politely declined. Instead, he suggested that when his assignment in the Persian Gulf came to an end, and before moving to another post with Chase, he might consider taking a long leave of absence to join the AMF on secondment basis from Chase Manhattan.[27]

David Rockefeller (second from right) is seen shaking hands with Jawad Hashim (left); Nemir Kirdar (right) in 1980
David Rockefeller (right) is seen shaking hands with Jawad Hashim (left)

Initial investors[edit]

Hashim, in his capacity as President of the AMF, sought to solicit first the participation of institutional investors, mainly the national banks of each Persian Gulf state. Beginning in November 1980, he first wrote to the Chairman of the Board of the National Bank of Abu Dhabi (NBAD), Ahmed Khalifa Al-Suwaidi.[28] Similar letters were sent to the National Bank of Bahrain, Bank of Oman, The Dubai Bank, National Bank of Sharjah, Qatar National Bank and Commercial Bank of Qatar. Some of these letters were signed by Dr. Hashim while others were signed by Nemir Kirdar in his capacity as Advisor to the President of AMF. In all those letters, it was indicated that the project was undertaken by the Arab Monetary Fund. For example, by a letter dated January 17, 1981, to the Chairman of National Bank of Bahrain, it was stated that the AMF invites the said bank to contribute in the proposed investment company’s capital.[29]

In soliciting investors, whether institutional or individuals, the AMF indicated that Investcorp was the AMF’s creation and upon which it had spent substantial sums of money in the form of salaries, accommodation, travel and legal expenses. Investcorp was conceived pursuant to the interpretation of AMF’s Treaty by the then President of the Fund, Dr. Jawad Hashim.

By May 1981 (Nemir Kirdar was still an employee of AMF), the AMF “project” attracted individuals and institutions to participate in the capital of the proposed company: Investcorp. Approximately US$55 million were committed by the participants. Institutional participants whom Dr. Hashim, as President of AMF, solicited included:

The first individuals to participate in Investcorp’s capital were Dr. Hashim and a few of his friends under an entity called Gulf International Investment Network (GINET) with 12% shareholdings. Others included businessmen from various Persian Gulf states.

On May 24, 1981, an application was made to Bahrain Ministry of Commerce and Agriculture for the incorporation of Investcorp as a Bahrain Exempt Company. While the application was pending approval, the founder shareholders held their first meeting on August 12, 1981, at the Hilton Hotel, Manama, Bahrain.[30][31]

Pursuant to the understanding between Kirdar and Dr. Hashim at an earlier meeting in the Summer of 1981, Kirdar left the AMF, resigned from Chase Manhattan Bank[32] and assumed the post of Project Coordinator in Manama, Bahrain. As there were no budget to cover the project’s expenses from this point, Dr. Hashim advanced US$50,000 from his personal account as a short-term loan. The loan was paid back at a later stage from fees generated by Investcorp.

On April 12, 1982 (nearly eleven months after the application), Bahrain Ministry of Commerce and Agriculture approved the incorporation of Investcorp. Thus, Investcorp (the AMF’s brainchild) came into legal existence with its official name being Arab Investment banking Corporation.

On Sunday, June 20, 1982, Investcorp held its first meeting of the Board of Directors at the Holiday Inn, Manama, Bahrain. Nemir Kirdar was elected as President and CEO of Investcorp for a three-year term. Kirdar however opposed a similar three-year term for the Chairman position to be held by Dr. Hashim.

When Dr. Hashim’s term of office as President of the Arab Monetary Fund ended in May 1982, and because of political differences with Saddam Hussein, he did not go back to Iraq but went to live in London, England. In early June 1982, he sent his written resignation as Presidential Advisor to President Saddam Hussein but his resignation was ignored. Between June 1982 and July 1983, Dr. Hashim received numerous threats from Iraqi intelligence.

Due to the issues with the Iraqi government, Dr. Hashim was unable to perform his functions with Investcorp and attend its Board of Directors and Executive Committee meetings. On December 7, 1983, Dr. Hashim resigned from Investcorp’s Board of Directors and its Executive Committee. His resignation was accepted on February 16, 1984.[33]

1984-90[edit]

In 1984 Investcorp opened its second office in London. In the same year, Investcorp acquired Tiffany & Co.

The early days of Investcorp’s real estate business saw a number of asset trading investments, including the acquisition of the freehold of Tiffany’s flagship store, which was exited the following year.

Corporate acquisitions in the mid-1980s included Dellwood, a dairy processor, Jiffy Lube, an auto service franchiser, Mueller, a fluid flow control manufacturer, Peebles Department Stores and golf cart manufacturer Club Car in the US, along with yacht maker Riva in Europe.

In 1986 a group of international banks participated in a Eurodollar credit facility of $50 million, the first to be arranged for Investcorp.

In 1987 Investcorp completed the initial public offering of Tiffany on the New York Stock Exchange. Catherines, a women’s wear retailer, and Fox Photo, a photofinishing company, were acquired in the US. European acquisitions that year included Breguet, a Swiss watchmaker, and Chaumet, a French jeweller.

Exits in the later 1980s included Club Car, Mueller, Riva and Peebles Department Stores. Acquisitions in that period in the US included Burnham, a transport and distribution company, New York Department Stores, Main Street Dairy and retailer Sports and Recreation. In Europe, 50% of Gucci was acquired along with aluminium products manufacturer Thecla Industries.

In 1989 Investcorp opened its US office at 280 Park Avenue, New York.

The 1990s[edit]

In 1990 Investcorp acquired Saks Fifth Avenue, its largest ever transaction.

Corporate exits in the first years of the decade included Main Street Dairy, Fox Photo and Thecla Industries. In 1991, Catherines was taken public and in 1992 Sports & Recreation.

The next year Investcorp arranged the acquisition of US retail chain Circle K, while in Europe it bought Thorn Lighting, a manufacturer of light fittings.

Investcorp’s new London office at 48 Grosvenor Street was opened by Baroness Thatcher in 1994.

In 1995 Investcorp refocused its real estate business, shifting away from development activity to an investor-driven approach based on prime properties offering a cashflow stream. The purchase of the Boston Properties portfolio in that year represented the first acquisition of a group of buildings, rather than a single building. A portfolio model was then adopted going forward, i.e. acquiring portfolios of similar properties, but in different locations, to spread risk. The acquisition in 1997 of PacInvest, a group of seven mid-market hotels in California, represented the first portfolio specifically arranged by Investcorp.

US acquisitions in the mid-1990s included: supermarket chain Star Market, Simmons, a bedding manufacturer, CSK Auto, an auto parts retailer, Prime Equipment, an industrial rental equipment supplier, and Carter’s, a manufacturer of babywear. Ebel, a Swiss watch manufacturer, was acquired in 1994.

In 1994 Thorn Lighting was taken public on the London Stock Exchange, and the following year Gucci and Circle K were taken public on the New York Stock Exchange. Saks Fifth Avenue and Prime Service (formerly Prime Equipment) followed with New York IPOs in 1996.

In 1997 the Firm moved into the hedge funds space, launching a third line of business with three fund of funds, with a fourth fund being added in 1999.

In 1997, some 62 banks participated in a $400 million revolving credit facility, Investcorp’s 11th medium-term facility. The following year Investcorp completed its first US capital markets transaction with a US private placement of $180 million in seven and ten-year tranches.

Acquisitions in the US in the later 1990s included Falcon, a manufacturer of building products, and Harborside Healthcare. Acquisitions in Europe at that time included Leica Geosystems, a Swiss measurement equipment manufacturer, Avecia, a specialty chemicals business and Helly Hansen, a Norwegian manufacturer of outdoor apparel.

In 1998, Investcorp and its clients sold Simmons and CSK Auto was taken public with an IPO.

The 2000s[edit]

In the US, Investcorp acquired in 2000 Jostens, a manufacturer of school-related affinity products, while in Europe, the firm acquired Gerresheimer Glas, a provider of glass packaging.

In 2001 Investcorp launched a technology investment business, raising a $250 million fund. Investments which have now been successfully exited from the fund include Acta, Mobile365, ObjectStar, Portalplayer, Softek and Spectel.

Corporate acquisitions in the early years of the decade in the US included Neptune, a water meter manufacturer and supplier, ECI, a provider of telephone conferencing services, and MW Manufacturers, a window and patio door manufacturer. In Europe Stahl, a supplier of specialty chemicals for leather processing, was acquired. Carter’s was sold in 2001.

Investcorp changed its fiscal year-end to June 30 in 2003.

In 2003, Investcorp acquired Minimax, a German fire protection systems company and Hilding Anders, a Swedish bed and mattress manufacturer. Neptune and Jostens in the US were exited.

In the following year, Investcorp acquired APCOA, a German parking management company. In the US, acquisitions included Thomson Media (later renamed Source Media), a US provider of information products and solutions. CSK Auto, MW Manufacturers, ECI and Gerresheimer Glas were all sold.

In its real estate activities, the decade from 2000 saw Investcorp arrange some 29 portfolios of US real estate for placement with its investors, ranging across the spectrum of office, commercial, residential, retail and hotel properties. In addition, a small number of individual prime properties were placed, such as the W South Beach Condominium Hotel in Miami, Florida in 2010.

In 2004, Investcorp further extended its hedge fund offerings to include single manager seeding funds, with Cura Capital Management as its first partner. This was followed over the following four years with other partnerships including Interlachen Capital Group, Silverback Asset Management and Stoneworks Asset Management..

In 2005 acquisitions included American Tire, a tire distributor; Associated Materials, a manufacturer and distributor of exterior residential building products; CCC, a US provider of automotive insurance claims software and Polyconcept, a European vendor of promotional gifts.

2005 also saw a second technology fund totalling $300 million being raised. Investments have included Moneybookers (now Skrill), a European digital payment company. The investment in Trema, a French company, has been exited.

In 2006 corporate investment acquisitions included Autodistribution, a French auto parts distributor; Armacell, a global manufacturer of engineered foams; and FleetPride, an independent US truck parts distributor. Exits included Minimax and Saks.

Three companies were acquired in 2007: Moody International, a UK-based provider of technical and inspection services; Icopal, a producer of roofing and waterproofing membranes; and Berlin Packaging, a US supplier of custom and stock rigid packaging. Exits in the year included APCOA, Helly Hansen, Harborside, and Hilding Anders.

Investcorp made a successful offering of GDRs on the London Stock Exchange in 2006.

Investcorp’s 2007 fiscal year saw the firm’s highest ever profit to date, with net income of $302m. The year also saw a record $3.4 billion being raised from clients.

Investcorp also launched in 2007 a fifth line of business to make growth capital investments in greenfield projects and buyout opportunities in the MENA region, raising over $1 billion in the Gulf Opportunity Fund and making its first investment, Redington Gulf, a UAE based supply chain service provider.

In its 2007–2008 fiscal year, acquisitions included B2B media company Randall-Reilly in the US, Asiakastieto, a Finnish credit information business and CEME, and Italian manufacturer of fluid control components. In 2008 Investcorp’s third technology fund raised $500 million. Investments so far include telematics solutions provider Fleetmatics, TDX, a UK-based provider of credit risk management solutions, eviivo, a UK online reservation provider for the independent hotels sector, and OpSec Security Group, an anti-counterfeiting technology company. In its 2009 fiscal year, Investcorp recorded its first annual loss, but returning to profit in the 2010 and 2011 fiscal years. During its 2009 fiscal year, the firm also concluded a preference share issue, with subscriptions of over $500 million. New acquisitions in that year included N&W Global Vending, a pan-European manufacturer of food and beverage vending machines.

In 2010 Investcorp delisted its London-listed GDRs due to changed market conditions.

In fiscal 2010 the firm acquired Veritext, a provider of litigation support services in the United States, and made additional investments in Berlin Packaging and in Skrill, as well as its third growth capital investment in Gulf Cryo, a Kuwait industrial gases company. The firm sold Associated Materials and American Tire Distributors, as well as completing the exit of Avecia's Biologics business. In real estate, exits included the sale of the final properties in the Empire Mountain Village portfolio.

In the following fiscal year, Investcorp made its fourth growth capital investment with an investment in Tiryaki Agro, a Turkish agro trader. New hedge fund managers seeded in the single manager platform were Ballast Capital Management and Prosiris Capital Management.

In early 2011 Moody International - acquired in 2007 for $311 million - was sold for $729 million.

In September 2011 Reed Elsevier agreed to purchase U.S. online-data business Accuity Holdings Inc. from investment firm Investcorp for £343 million ($530.1 million) in cash.[34] The deal was closed in November 2011.

References[edit]

  1. ^ Khalaf, Roula (2008-07-29). "Investcorp's plan to ride out the tough times". FT.com. Retrieved 2013-10-04. 
  2. ^ "In Times of Trouble". Forbes. Retrieved 2013-10-04. 
  3. ^ "Buyout firm Investcorp moves to mainstream fundraising strategy". Efinancialnews.com. 2010-04-05. Retrieved 2013-10-04. 
  4. ^ "Investcorp goes home - Real Deals". Realdeals.eu.com. 2007-12-11. Retrieved 2013-10-04. 
  5. ^ a b "Investcorp Technology Partners raises $500m fund - Real Deals". Realdeals.eu.com. 2008-01-28. Retrieved 2013-10-04. 
  6. ^ "Jam today, jam tomorrow". The Economist. 2008-02-28. Retrieved 2013-10-04. 
  7. ^ "International banking, finance, capital markets news & analysis | Euromoney magazine". Euromoney.com. Retrieved 2013-10-04. 
  8. ^ "PEI 300 2011 - Top 50 - PEI". Peimedia.com. Retrieved 2013-10-04. 
  9. ^ "PEI Manager Archive 2008". Private Equity Manager. 2013-09-30. Retrieved 2013-10-04. 
  10. ^ "Investcorp sells Neptune for $475m - PE Asia". Privateequityasia.com. Retrieved 2013-10-04. 
  11. ^ Smith, Peter (2005-08-29). "Investcorp reports rise in net income". FT.com. Retrieved 2013-10-04. 
  12. ^ "Candover beats Texas Pacific in Hilding Anders deal". Efinancialnews.com. 2006-10-26. Retrieved 2013-10-04. 
  13. ^ "Investcorp: Apcoa geht an Eurazeo - manager magazin". Manager-magazin.de. 2007-02-19. Retrieved 2013-10-04. 
  14. ^ "American Tire Distributors Holdings Announces Acquisition By". Bloomberg. 2010-04-21. Retrieved 2013-10-04. 
  15. ^ Gray, Alistair (2011-03-08). "Intertek in £450m Moody International deal". FT.com. Retrieved 2013-10-04. 
  16. ^ Hillary Canada (2012-10-09). "FleetPride Motors Over to Its Latest Private Owner, TPG". Pevc.dowjones.com. Retrieved 2013-10-04. 
  17. ^ http://www.privateequityrealestate.net/resources/PERE%2007/JulyPERE07_lowresfinal.pdf
  18. ^ "CORRECTED - Investcorp launches $1 bln U.S. real estate debt fund | Reuters". Uk.reuters.com. 2008-09-22. Retrieved 2013-10-04. 
  19. ^ "Investcorp eyes overlooked hedge funds". Reuters. 2010-05-20. Retrieved 2013-10-04. 
  20. ^ "Hedge fund Prosiris Capital secures assets from Investcorp and place on single manager platform". Opalesque. Retrieved 2013-10-04. 
  21. ^ "Customised solutions help to grow Investcorp's institutional following". HedgeFund Intelligence. 2009-11-05. Retrieved 2013-10-04. 
  22. ^ "Deepak Gurnani: How a "risk master" addresses hedge funds' "average" risk management - Opalesque TV". opalesque.tv. Retrieved 2014-01-26. 
  23. ^ "Investcorp Research: The great misallocation - larger hedge funds are not safer than emerging managers". Opalesque TV. 2011-12-23. Retrieved 2013-10-04. 
  24. ^ Appendix-10 PDF file
  25. ^ own hand-written testimony
  26. ^ http://www.jmhinternational.com/investcorp/pdf/appendixes/appendix001/appendix001.pdf Appendix-01 PDF file, Paragraphs 10-13, Mr. Kirdar’s Testimony
  27. ^ Appendix-01 PDF file, Paragraph 3, Mr. Kirdar’s Testimony.
  28. ^ Appendix-06 PDF file
  29. ^ Appendix-07 PDF file
  30. ^ "investcorp/images/amf_extracts01". jmhinternational.com. Retrieved 2014-01-26. 
  31. ^ "investcorp/images/amf_extracts02". jmhinternational.com. Retrieved 2014-01-26. 
  32. ^ International Herald Tribune February 17, 1993
  33. ^ Appendix-09 PDF file
  34. ^ Vitorovich, Lilly (2011-09-26). "Reed Elsevier to Buy Accuity - WSJ.com". Online.wsj.com. Retrieved 2013-10-04. 

External links[edit]