8 Jul 2009
Investcorp, the asset management firm specialising in alternative investments, and its consortium partners Eastgate Capital Group and The National Investor, today announced that they had acquired a 70% stake in L’azurde, one of the world’s largest gold and jewellery manufacturers and a leading Middle East brand, which has its headquarters in Riyadh in Saudi Arabia.
L’azurde was founded by Mr. Abdul Aziz Al Othaim. Over some three decades, it has developed into a market-leading business with a well-known brand, high quality product and design, strong manufacturing and distribution capabilities, and economies of scale advantages. Today, it is the Arab world’s leading designer, manufacturer and distributor of gold jewellery for the mass market, and the fourth largest such company globally. According to a recent Forbes Arabia study, L’azurde is one of the best known brands in the Arab world.
L’azurde has state of the art manufacturing facilities in Riyadh and Cairo employing over 2000 people, and sells throughout the Middle East through 4,200 wholesale accounts, including to secondary markets through its distribution capabilities in the UAE. In addition, it has 18 flagship retail stores across the region. L’azurde had 2008 revenues of more than US$ 500 million and grew EBITDA by 14% over the previous year, making it over four times the size of its nearest competitor. In the past two years L’azurde has undertaken, in conjunction with the World Gold Council, one of the most extensive advertising campaigns ever seen in the region featuring Elissa, one of the best-known female singers in the Arab world, as its public face.
MENA is one of the largest and fastest growing jewellery markets — 12% of world consumption and 14% CAGR in value — and growth is expected to continue, largely driven by cultural factors. Gold is seen as a means of storing wealth, especially as part of dowries. Currently, approximately 50% of the regional population is under 20 years old and some 50% of gold consumption is wedding-related, providing strong underpinning for future demand. Gold is also an important fashion item in the region. L’azurde takes no risk on gold price volatility, as it has implemented a gold price pass-through mechanism.
Investcorp has made the investment through its $1.1 billion Gulf Opportunity Fund I, the first fund from Investcorp’s Gulf Growth Capital business, launched in 2007. This acquisition comes two months after the Fund closed its first deal, the November 2008 acquisition of Redington Gulf, the leading distributor and service provider of IT and telecom products in the Middle East and Africa. The Investcorp-led consortium will be the majority shareholder in L’azurde, and will help to institutionalise the company, to expand its markets and to build its brand across MENA and internationally. Mr Al Othaim remains a significant minority shareholder, and he will continue as Chief Executive and Chairman of the L’Azurde.
Mr. Nemir Kirdar, Executive Chairman & CEO of Investcorp, said: “Despite challenging economic and market conditions, this is evidence of the resilience of Investcorp’s unique business model. Good business opportunities are available in MENA and deals can be done. Our Gulf franchise and local reputation were key in getting us this deal and in forging this partnership with Mr. Al Othaim to add value to L’azurde over the coming years.”
Mr. Abdul Aziz Al Othaim, L’azurde’s Founder, Chief Executive and Chairman, said: “From the beginning, my mission has been to develop quality and affordable gold and fashion jewellery, while achieving sustained growth and added value for customers and shareholders. Investcorp is the perfect partner for L’azurde as we continue to grow. Not only is Investcorp tremendously respected as the pioneer of private equity in the region, but it also has extraordinary relevant experience in growing global consumer brands, including Gucci and Tiffany & Co. I believe that partnership with Investcorp, a firm that shares my vision and business ethics, will open the next successful chapter in L’azurde’s story.”
Mr Azmat Taufique, co-head of Investcorp’s Gulf Growth Capital business, said: “We have agreed this deal based on 2008 real performance and current market conditions. L’azurde is a business that performs well even in difficult market conditions and one that has tremendous development potential. Mr Al Othaim has built it as a non-cyclical business appealing to a wide range of retail and wholesale consumers due to its craftsmanship, creative design and strong brand. In addition, the Middle East jewellery market is underpinned by a growing middle class, strong demographics, cultural affinity with gold and increasing fashion consciousness. We believe there is significant potential to take L’azurde’s strong base and extend it further across the MENA region, creating the platform for a truly international brand.”
Mr Christophe de Mahieu, co-head of Investcorp’s Gulf Growth Capital business said: “L’azurde plays at the heart of Investcorp’s strengths, our expertise in the jewellery business and our superior capabilities in value enhancement management. We are very much looking forward to working with Mr. Al Othaim and our partners to continue growing and enhancing the performance of the company.”
Credit Suisse Middle East Investment Banking was adviser to the Al Othaim Holding Company.
Eastgate Capital Group is the private equity investment arm of NCB group of Saudi Arabia. Eastgate’s mandate is to source, structure and invest in attractive private equity and real estate opportunities across global emerging markets, with particular emphasis on the Middle East, North Africa, and Turkey. The firm currently has over US$650 million in commitments under management. Eastgate MENA Direct Equity Fund, the flagship product of the firm, is a Shariah compliant fund focused on growth investments in the more resilient consumer-centric sectors, with an active value-add investment approach. The Fund focuses primarily on the Saudi Arabian market and selectively seeks attractive investments in other sizable regional economies like Egypt and Turkey. The Fund had a first closing at US$250 million, and is targeting a final size of US$400-500 million.
TNI is a regional investment and merchant banking group (full service financial services firm) based in Abu Dhabi, and ranks as the leading arranger of public share offerings with total transaction value exceeding AED 10.6 billion. TNI makes private equity investments through its flagship fund, the TNI Growth Capital Fund I (‘GCF’).