Al Habtoor eyed listings on up to four bourses

Al Habtoor Group, the Dubai-based conglomerate, had ambitious plans to list on as many as four stock exchanges prior to the unexpected postponement of a US$1.6 billion (Dh5.88bn) initial public offering (IPO) last month.

Khalaf Al Habtoor, the chairman of the hotels to automobiles combine, said the company was considering listings on the Dubai Financial Market, Nasdaq Dubai, the London Stock Exchange, and even Saudi Arabia's Tadawul market.

The move would have been groundbreaking for the UAE. No other company is listed on both Dubai exchanges, which have common trading and back-office services but which also have significantly different listing rules.

Mr Al Habtoor said: "It would have been a good start to go on both ND and DFM. The rules could have been changed. We discussed doing this with the two markets and it was a possibility, but never promised."

He added, "It would be a good thing if they were more linked and put closer together."

On the possibility of a listing in Saudi Arabia, Mr Al Habtoor said: "It is such a big country, economy and market. Lots of institutions there were ready to help us, but we didn't get to the stage of approaching the government."

Speaking exclusively to The National at Al Habtoor's Dubai headquarters, he explained in detail why the IPO, planned for this year, had been postponed.

"It's not the first time we've considered an IPO. During the preparation this time I was working hard on projects in the GCC and Europe, but it wasn't easy to find a project or acquisition that would satisfy shareholders and give a decent return."

He said he looked at assets in Britain, Germany and France, mainly in the hotel business, but "I was not interested in just a trophy asset. I wanted one that would generate a decent return."

He also looked at possible acquisitions in Asia, "but we don't know enough about the rules and regulations there. I don't want to speculate with other people's money in Asia".

When he called off the IPO last month he cited "moral issues" as the reason, a remark that mystified some Dubai financiers.

"Morally, I was not comfortable to take other people's money and just put it in the bank, without generating a return … I had a holiday in New York and England a few weeks ago and decided against the IPO. I couldn't sleep with the thought of having so much of other people's money as my responsibility," he explained.

He made it clear the proceeds from an IPO would have been used on expansion plans in the UAE and abroad, and not to fund the $1.6bn of investment Al Habtoor is committed to over the next few years.

"That can all be funded from cash flow. We will not do it from bank borrowing. We have only a very small amount of bank debt relative to the size of our company, and none of it is related to current investment projects," he said.

Al Habtoor is building three new hotels on the site of the now-demolished Metropolitan complex in Dubai, as well as a "Las Vegas-type theatre" and residential units along a new canal planned in Dubai. Completion is expected in the next 30 months, Mr Al Habtoor said.

It is also nearing completion on a hotel on the Palm Jumeirah, expected to open in August.

The group expects earnings to rise by more than 10 per cent in 2013.

While Habtoor previously forecast a 16 per cent increase in earnings for last year to Dh700 million, he said the estimate was "conservative".

When the IPO was called off, Al Habtoor revealed a valuation of $6.06bn for the company, excluding certain foreign assets.

"The valuation was done by Grant Thornton [Al Habtoor's accounting advisers] and it doesn't mean I'm in agreement with it.

"In some areas, maybe it wasn't right. GT did a great job, but perhaps they don't see it the same way as me. Perhaps I'm in love with certain properties, they are my trophy assets.

"I wasn't happy about the valuation of the automotive business, I think that was worth more, but GT are the real professionals," he added.

The IPO preparations did not get to the stage of appointing an investment bank to head up the process.

"Some banks, like HSBC, Deutsche Bank, Goldman Sachs, Emirates NBD and National Bank of Abu Dhabi were a great help to me," he said.

He does not rule out the prospect of another attempt at an IPO.

"We will reassess it again in 2014, so it might be possible in 2015 … every two or three years we look at the scenario, and it's like a process of education … I feel like an expert in IPOs. Maybe somebody will hire me to help with theirs," he joked.

fkane@thenational.ae

Farage on Muslim Brotherhood

Nigel Farage told Reform's annual conference that the party will proscribe the Muslim Brotherhood if he becomes Prime Minister.
"We will stop dangerous organisations with links to terrorism operating in our country," he said. "Quite why we've been so gutless about this – both Labour and Conservative – I don't know.
“All across the Middle East, countries have banned and proscribed the Muslim Brotherhood as a dangerous organisation. We will do the very same.”
It is 10 years since a ground-breaking report into the Muslim Brotherhood by Sir John Jenkins.
Among the former diplomat's findings was an assessment that “the use of extreme violence in the pursuit of the perfect Islamic society” has “never been institutionally disowned” by the movement.
The prime minister at the time, David Cameron, who commissioned the report, said membership or association with the Muslim Brotherhood was a "possible indicator of extremism" but it would not be banned.

A Cat, A Man, and Two Women
Junichiro Tamizaki
Translated by Paul McCarthy
Daunt Books

Who's who in Yemen conflict

Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government

Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council

Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south

Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory

The National Archives, Abu Dhabi

Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.

Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en

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UAE currency: the story behind the money in your pockets

The alternatives

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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.”