KKR & Co. (KKR:US), the private equity firm led by Henry Kravis and George Roberts, is competing with Abraaj Group to buy a majority stake in Saudi Arabian restaurant business Kudu, two people familiar with the transaction said.
Abraaj, the largest buyout firm in the Middle East, and New York-based KKR reached the second stage of bidding to acquire about 60 percent of the fast-food chain, said the people, asking not to be identified because the information is private. HSBC Holdings Plc’s Saudi unit is managing the sale of the business, which operates 200 outlets in the region, they said.
Two of Kudu’s four partners are selling their stake in a deal expected to value the company at between 1.5 billion ($400 million) and 2 billion riyals, one of the people said. Abraaj, which manages $7.5 billion from Dubai, also plans an initial public offering of oil-and gas-service company Stanford Marine Group as soon as the first quarter, the person said.
Incomes in Saudi Arabia, the biggest Arab economy and home to 28 million people, are growing as the government executes a $500 billion investment plan to build industries, roads and housing. KKR rival Carlyle Group LP (CG:US) in 2011 bought a 42 percent stake in Alamar Foods, which operates Dominos (DPZ:US) and Wendy’s restaurants in the country and operates a food processing plant.
A Kudu spokesman, who asked not to be identified because of company policy, declined to comment. A spokesman for Abraaj in Dubai and officials at KKR and Stanford Marine also declined to comment. HSBC also declined comment.
Kudu, founded about 25 years ago, sells meals including burgers, chicken and fries and steak and eggs.
Saudi Arabia’s economy will probably expand 4.2 percent this year, according to the median forecast of 18 economists in a Bloomberg survey. Growth in the world’s biggest oil exporter surged 6.8 percent last year and by 8.5 percent in 2011.
Private-equity firms typically pool money from pension plans and endowments with a mandate to buy companies within five to six years, then sell them and return the cash and a profit after 10 years. The firms usually charge a fee of as much as 2 percent and keep 20 percent of profits from investments.
KKR has been raising new money for Asian and North American funds and has invested $5.5 billion in 30 companies in Asia, Joseph Bae, managing partner in the region, told journalists today in Hong Kong. The company in July said that second-quarter profit fell 75 percent as its portfolio holdings gained less than they did a year earlier.
KKR rose 0.1 percent to $20.03 at the close of trading in New York on Sept. 13 and has gained 32 percent this year.
Abraaj is also seeking to divest stakes in Middle Eastern supermarket chain Spinneys and a Tunisian pharmaceuticals company, a person with knowledge of the matter said in February. Its Stanford Marine unit is raising a $300 million, five-year loan to replace existing debt, three people familiar with the plan said Sept 1. Standard Chartered Plc (STAN) and Emirates NBD PJSC (EMIRATES) are helping arrange the loan for the company, they said.
The Abraaj Group and the Aydinlar family in July also agreed to sell a 90 percent stake in a Turkish health insurer to a Malaysian sovereign fund for $252 million.
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