Drake and Scull launches Dh1.2bn IPO

Drake and Scull has launched a Dh1.2-billion initial public offering to raise funds for an aggressive cross-border expansion strategy.

The Dubai-based contractor will sell 1.2bn shares at Dh1 each, which represents 55 per cent of the company, with the offer period open from July 8 to July 17. There will be an administration charge of Dh0.02 per share.

"We are targeting three to four companies from across the region and are already at the due diligence stage," said Khaldoun Tabari, Drake and Scull Executive Director.

"Whether these will be a complete buyout is yet to be determined. We are looking to expand both horizontally and vertically."

Tabari said the company had considered debt financing, but the high-cost of borrowing made an IPO the best way to source new capital.

The shares will list on the Dubai Financial Market (DFM) by end of September or early October, Tabari said. The company considered listing on the Dubai International Finance Exchange, but the superior liquidity of the DFM made it a more attractive market, he added.

The shares will be sold in four tranches. The first will be reserved for individual UAE nationals and will comprise 18 per cent of the total offering, while the second will be for UAE and GCC individual and institutional investors, with this accounting for 58 per cent of all shares. Foreign individuals and institutions have a 19 per cent allocation, with the remaining five per cent reserved for the UAE Ministry of Labour. Foreign individuals must be UAE residents to subscribe.

Tabari admitted the company would have preferred to retain majority control, but could not wait for the UAE regulator to complete the long-mooted law change to cut the minimum float from 55 per cent to 30 per cent. The company specialises in mechanical, electrical and plumbing (MEP) infrastructure, plus industrial water and power projects and civil engineering.

Drake and Scull derives all its revenues from within the UAE, but is now looking to expand beyond its borders and exploit the fast growing economies of the Middle East and North Africa, with an emphasis on Saudi Arabia, Kuwait and Qatar.

Drake and Scull has won Dh2 billion worth of contracts so far in 2008.