GAC rules out IPO to fund its expansion

Global shipping and logistics provider Gulf Agency Company (GAC) Group has ruled out launching an initial public offering (IPO) to fund expansion and acquisition programmes, a senior official has revealed.

The group intends to maintain its current funding model which involves significant levels of self-financing complemented by loans from regional and international banks.

"We are content with our financing model and see no reason at all to go to a capital market to rise money," Group Director Bengt Ekstrand told Emirates Business. "For us launching an IPO is totally out of the question. The group's performance has been good and we will continue to fund our programmes from our returns with additional financing from banks."

Dubai-based GAC is a world leader in shipping, logistics and marine services with clients across the globe, though the Middle East remains its core market.

The group started as a shipping agency operating in the Middle East but later adopted a global approach and diversified.

Ekstrand said GAC was not scouting for opportunities and any expansion or acquisitions would be customer-driven.

"We do not go out looking for opportunities," he added. "Our customers who want to benefit from our services wherever they ship items are the ones who inform us about opportunities and encourage us to invest in certain areas. And we have partners in various locations who approach us and ask us to buy them."

Over the last 12 months GAC has invested Dh183 million in acquisitions and expansion programmes in Algeria and Australia for shipping services and Kazakhstan for oil logistics services - all based on recommendations from the group's customers and partners.

Recently the group acquired 100 per cent of UK-based shipping and logistics group OBC. The acquisition saw OBC rebranded as GAC-OBC and the company will continue to handle vessels in ports in the UK, the Netherlands and the US Gulf Coast.

But Ekstrand said the group had for a long time been growing through expansion rather than acquisitions. GAC, which began operations from Kuwait in 1959, has built up an integrated worldwide network of more than 300 offices spread across 45 countries.

It has 8,500 employees and an annual turnover of Dh5.49 billion. The Group has achieved a 15 per cent year-on-year revenue growth across the board over the past three years and expects the figure to rise this year.

"The current conditions in the Middle East, especially with the increasing fuel prices, are favourable for our line of business. The past few years have been good to us and we see the trend continuing." GAC, which was previously headquartered in Athens, Greece, moved to Dubai in 2002 to benefit from the emirate's growing prominence as an air and sea transport hub and to move closer to its main markets in Asia, Africa and here in the Middle East.

Ekstrand said the group's main business areas complemented each other and contributed equally to the general growth.

GAC, through its shipping agency, handles 40,000 port calls globally per year, with 15,000 of them in the Middle East. The group offers marine and associated services to the international offshore and shipping industries as well as marine civil construction and ship-to-ship transfer services. The business was the first to set up a logistics company in the UAE in 1993 and today it has a total of 122,000 palette positions at its main warehouse in Jebel Ali supported by a fleet of group-owned and hired vehicles. The logistics division is hoping to benefit from the establishment of the GCC common market through quick border processing and access to a broader customer base as the movement of labour is eased. Last year the group formed GAC Solutions to provide a tailored service to clients across its business sectors. While the group foresees increased growth in revenues it is facing human resources challenges that could hold it back.

"There is a talent crisis everywhere," added Ekstrand. "We have a staff of 3,500 in the region but we need more in order to achieve certain targets. However, people are finding no incentives to come to the region as the cost of living increases and conditions in their home countries improve. Instead we see more staff leaving."

Despite the global scale of its operations the group had managed to escape the economic slowdown that has hit the US and led to poor performance by a number of international companies.

The numbers

5.4bn: The yearly turnover in dirhams for GAC which has a workforce of 8,500 and 300 offices globally

15%: Year-on-year growth for GAC over the past three years

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