Gulf money that flooded beyond the region in the boom years is trickling back as companies with sprawling overseas holdings dispose of non-core assets.
No longer flushed with the cash with which they hunted overseas buys to dilute their exposure to local markets, many GCC firms are now retrenching strategically.
Global Investment House is the latest Gulf-based company to confirm it is seeking to dispose of specific assets outside the Gulf. The firm is in talks to exit its stake in Egypt's Real Estate Finance House Company. Prior to the Global news, Dubai Holding, subsidiary of Dubai Group, sold a part of its stake in Cairo-based EFG-Hermes in December. Dubai Group is evaluating its remaining assets, a spokesperson said.
The reason for overseas non-core asset sales is two-fold, say bankers. First, companies need to keep cash flowing through their core businesses, which are typically domestic. And second, there are now good opportunities to invest at home.
Global has said its Egyptian sale is distinct from its debt restructuring process. But the number of firms in the region struggling to retain liquidity will ensure a rise in assets on the market. Jewellery retailer Damas International is yet another example of a regional entity selling off non-core assets.
Damas is listed on Nasdaq Dubai. However, to date, the local consolidation trend has been for combinations involving companies listed on the DFM. The latest involves the proposed acquisition of a 70 per cent stake in Arabtec by Aabar Investments. This follows an offer in December by the DFM itself to acquire its sister company Nasdaq Dubai.
The DFM is proposing to purchase the 67 per cent stake held by its parent company Borse Dubai in its international counterpart and the 33 per cent stake held by Nasdaq OMX.
These latest deals follow on the heels of the announced merger of another DFM-listed entity, Emaar Properties, with Dubai Holding subsidiaries Dubai Properties, Sama Dubai and Tatweer, since cancelled, and the combination of Amlak Finance with Tamweel, which are both DFM-listed. That latter merger has yet to be completed.
DFM minority shareholders will not be consulted but seem to have received the news of the Nasdaq Dubai acquisition favourably.
In distinct contrast, the surprise announcement of the Emaar merger in June met with shareholder consternation and fears of a significant dilution of shareholdings. The deal was called off in December, when a decision was made that it was not in the interests of shareholders. "It was cancelled purely on the merits of the deal," one source said. The Dubai government owns 32 per cent of Emaar.
The cancellation of the Emaar deal signals a new focus on ensuring the economic viability of transactions and the protection of shareholder value.
The DFM/Nasdaq Dubai transaction is another step towards the rationalisation of holdings. And it is expected to be followed by further divestment and consolidation announcements.
- The author represents dealReporter, part of The Mergermarket Group
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