Al-Futtaim Group, one of the biggest conglomerates in UAE, is set to receive more than US$1 billion (Dh3.67bn) in financing to manage expansion in Qatar and Egypt.
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The company is in the final stagesof signing a loan facility worth 3.7bn Qatari rials (Dh3.73bn) to help build Doha Festival City and will also borrow 2bn Egyptian pounds (Dh1.22bn) to expand in Cairo.
Marwan Shehadeh, the director of corporate development at Al-Futtaim, says the group will also complete three acquisitions in the retail and construction sectors within weeks. "We are in a very expansionary mode," he said. "We are growing both organically and through acquisitions. We have been conservative in terms of leverage and we are very diversified."
Al-Futtaim joins the retail competitor Majid Al Futtaim (MAF), which operates a number of malls and Carrefour stores in the Middle East, in raising finance for expansion.
MAF is looking to issue a sukuk worth $500 million to help fund plans worth $2bn for malls and shopping centres in Lebanon, Egypt and Syria, as well as a hypermarket in Erbil in Iraq.
Mr Shehadeh said two acquisitions were "very, very close" in Saudi Arabia and another "much larger" deal would be signed in another country in a few weeks.
The two loans being financed were not being used for the acquisitions, Mr Shehadeh said, but the company would use a combination of further financing and cashflow to fund the purchases.
He declined to comment on the size of each of the deals, but Al-Futtaim has previously indicated it is planning to spend $500m on acquisitions around the Middle East and North Africa.
Mr Shehadeh said the financing it would receive for expansion in Egypt was previously put on hold by banks due to civil unrest, but this was now being finalised, despite recent political turmoil in Cairo. The company is in the process of building Cairo Festival City, a mall, hotel and leisure complex, similar to Dubai Festival City. It also began work last week on the 433,847 square metre Doha Festival City, a 6bn rials project being financed in conjunction with Qatar Islamic Bank and other investors.
The Doha mall and hotel complex, due to be completed in 2014, has already announced tenants such as Ikea, Toys "R" Us, Marks & Spencer and Intersport.
"We have several opportunities in Qatar, including acquisitions," said Mr Shehadeh.
Al-Futtaim has five core businesses - automotive, retail, financial services, property and electronics and engineering - which it aims to expand in other countries.
The automotive business provides the largest part of the group's revenues, dominating the UAE car market as the distributor of Toyota, Lexus, Honda, Volvo, Chrysler and Dodge vehicles.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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