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* TPG/Abraaj vs KKR for majority stake in Kudu - sources
* Worth 2 bln riyals based on 20-times 2013 earnings
* Would be first MidEast deal for TPG or KKR
* Bids reflect high investor interest in Saudi assets
By David French and Dinesh Nair
DUBAI, Nov 11 (Reuters) - TPG Capital and Abraaj Group haveteamed up to compete against KKR & Co for a majoritystake in Saudi Arabian fast-food chain Kudu, three banking andindustry sources said.
A stake purchase by either KKR or TPG would be their firstinvestment in the Middle East and shows the heightened interest in the region's economic growth and its young and increasinglywealthy population.
Riyadh-based Kudu, which operates more than 200 restaurantsin the kingdom, is owned by four individual shareholders,including chairman and chief executive Abdulmohsen Bin AbdulazizAl Yahya, according to data from Zawya, a Thomson Reuters unit.
Abraaj, the Middle East's largest private equity firm, hasrecently roped in TPG to the bidding process and was previouslybidding solely for the stake, the sources said, speaking oncondition of anonymity as the matter has not been made public.
Kudu is worth around 2 billion riyals ($533 million) basedon a valuation of around 20 times earnings, one of the sources,a regional private equity banker, said. The firm is expected tohave net income of around 100 million riyals this year, thesource added.
KKR, TPG and Abraaj all declined to comment, while Kuducould not be reached for comment.
"When you are talking about valuations of around 20 timesearnings, you are clearly in a seller's market. There are veryfew businesses in Saudi for sale and if it's a consumer play, italways commands a premium and lots of attention," the privateequity source said.
Saudi Arabia is the largest Gulf Arab economy and itsconsumer sector is booming.
Coca-Cola Co paid $980 million in December 2011 for a50 percent stake in Aujan Industries, one of the largestbeverage companies in the Middle East, while in the same yearCarlyle bought a 42 percent stake in a Saudi-based foodfranchise operator that runs Domino's Pizza and Wendy'srestaurants in the Middle East and North Africa.
Citigroup Inc's venture capital arm and Dubai-basedLevant Capital bought a $100 million controlling stake in SaudiArabian supermarket chain Al-Raya For Foodstuff Co last year.
Reuters reported in June that a majority stake in thebusiness has been put up for sale and KKR was one of thepotential bidders.
HSBC Holdings is advising the sellers.
