Investcorp to invest $98 million in Redington Gulf in first investment by its Gulf Opportunity Fund

14 Oct 2008

Investcorp, the asset management firm specializing in alternative investments, and Redington Gulf, the leading distributor and service provider of IT and telecom products in the Middle East and Africa, announced today that Investcorp has agreed to make a $98 million investment in Redington Gulf and become a significant minority shareholder of the company.

Investcorp will make the investment through its $1.1 billion Gulf Opportunity Fund I. The capital increase will be used to support Redington Gulf’s successful growth in the region. It will not only fund their organic growth, but also enable Redington Gulf to fund add-on acquisitions to expand their footprint and strong presence in countries throughout the Middle East and Africa.

Redington Gulf, is the unrivalled leading IT distributor and supply chain solutions provider in the Middle East and Africa, distributing over 24 brands of IT and telecom products for global vendors such as HP, Acer, Samsung, Western Digital, Nokia, Cisco and Avaya.  Redington Gulf is at present a wholly owned subsidiary of Redington India Ltd (REDIL), the globally distinguished IT distributor listed in India and operating in India, South Asia, the Middle East and Africa.  Redington Gulf is headquartered in Dubai, UAE, and currently operates on a standalone basis in the Middle East and key African countries with total revenues exceeding $1 billion for the last financial year. Redington has established a solid and superior track record in performance and organic growth across many markets in the Gulf and the rest of the region.

This transaction represents the first investment by Gulf Opportunity Fund I, Investcorp’s $1.1 billion private equity fund for the MENA region.

IT master distributors such as Redington Gulf are integrated supply chain management experts. They provide the link between the global equipment manufacturers and local resellers and retailers, who sell the products to end users such as government, corporate and individual consumers.  Thus they provide the vital service elements that increase efficiency and effectiveness in self transforming economies, such as those of the GCC.  The services provided by Redington Gulf include management of inventory, warehousing, logistics, transportation and credit management to local and regional resellers/retailers, managing the information flow and providing warranty and post warranty repair.

Investcorp will help Redington Gulf to develop and implement the next stage of its corporate strategy following a period of dramatic organic growth, by assisting with add-on acquisitions, banking/financial relationships and balance sheet optimisation.

Today Redington Gulf is active in 23 markets across the Middle East and Africa and has over 580 staff and a network of 14 entities in ten countries.  PCs and printers are currently the company’s biggest product lines, although mobile phones are growing in significance, particularly in Africa.

The Middle East has seen strong historical IT industry growth, but IT penetration levels are still low in many Middle East and African markets, and future average annual growth in the region is forecast to remain strong at 15% (Source: IDC).  The Middle Eastern and African IT distribution market is however complex and fragmented, with high barriers to entry due to factors including differing regulatory requirements, multiple duty and tax structures, varying credit and FX risks and a high level of service quality required by clients.

Investcorp Managing Director and co-head of its Gulf growth capital business, Azmat Taufique, said: “This first investment by our Gulf Opportunity Fund I perfectly showcases one of our key strategic thrusts for the MENA region: working with leading mid-sized international players to set up and/or expand joint ventures in the region. Redington Gulf has excellent prospects due to strong underlying demand in Middle East and Africa, driven in part by the massive investment programs of Gulf governments in health, education, and infrastructure, as well as the surging African telecom market.  We look forward to working together with Redington India Ltd to help Redington Gulf manage its rapid growth and maximize its potential.”

R. Srinivasan, Managing Director of Redington India Ltd said: “Redington Gulf has been a tremendous successful story for us by building itself, within a few years, into the leading distributor of IT and telecom products in the Middle East. Investcorp is now the perfect strategic partner to help Redington Gulf exploit further the exceptional opportunities in the Middle East and Africa.  We look forward to working together in close partnership.”

Investcorp Managing Director and co-head of its Gulf growth capital business Christophe de Mahieu, said: “We are truly delighted to become the partner of choice of Redington for the Gulf. This is a win-win partnership for growth and performance. Our respective operational and financial skills are highly complementary and we are fully aligned on what we aspire for Redington Gulf to achieve in the next 3-5 years.”

Raj Shankar, CEO of Redington Gulf, said: “Investcorp’s expertise and brand name in the region will be of very significant help to us over the next few years as we seek to sustain the rapid growth in revenues we have achieved.  Investcorp’s operational expertise in a wide range of relevant industries and situations will help us continue to drive improvements in our company, and its financial relationships and experience will be of great value in broadening our financing options and managing our financial stakeholders.”