Abu Dhabi's ADQ seeks to create $2.6bn aviation services entity

Holding company plans to combine its stakes in three companies with Abu Dhabi Aviation

ADQ is offering to combine its stakes in Etihad Engineering, Ammroc and GAL with Abu Dhabi Aviation. Photo: Etihad

Abu Dhabi's holding company ADQ submitted an offer to Abu Dhabi Aviation to combine its stakes in three aviation companies with ADA to create a maintenance, repair and overhaul (MRO) operator, with Dh9.4bn ($2.6bn) in assets.

ADQ seeks to combine its entire shareholding of Etihad Engineering and the Advanced Military Maintenance Repair and Overhaul Centre, along with its 50 per cent ownership of Global Aerospace Logistics, with ADA, it said on Monday.

The transaction will create an Abu Dhabi-based diversified aviation business that aims to position the emirate as a centre for MRO services, logistics, supply chain and advanced engineering.

The combined entity group will have an extensive portfolio of aircraft, MRO centers and hangars, according to ADQ.

“The proposed transaction will further position Abu Dhabi as a world-leading centre of aviation excellence, combining the strengths of each asset to form a global MRO and aviation services champion to capitalise on growth opportunities in the aviation industry,” said ADQ managing director and chief executive Mohamed Alsuwaidi.

“The proposed combination will provide a framework to investing in the future development of an advanced aviation ecosystem that supports the sustainable transformation of Abu Dhabi and the UAE’s economy for the long term.”

The global MRO industry is expected to grow to a $1 trillion business over the 2022-2031 period, according to Aviation Week Network.

Meanwhile, engine MRO demand will grow at 3.7 per cent that will boost the market size to $474bn over the next decade.

Specifically, Middle East demand for MRO services will grow to $12.9bn by 2031, it said.

On closing the transaction, ADA will issue a convertible instrument to ADQ that would convert into about 652 million ordinary shares of ADA, each priced at Dh6.14, ADQ said.

The offer implies an equity valuation of about Dh2.73bn, ADA said in a bourse filing on the Abu Dhabi Securities Exchange on Monday.

After completion, ADQ would own about 59.44 per cent of the entire issued share capital of ADA.

If the board of ADA recommends proceeding with the transaction, it will be subject to shareholder and regulatory approvals.

“Should an agreement be reached between parties, an ADA general assembly meeting would consider approving the transaction during the first quarter of 2023,” ADA said in the bourse filing.

“At this time, there is no certainty that any transaction will occur.”

The potential deal comes after a series of transactions in which ADQ has consolidated its assets over the past couple of years.

In March 2021, ADQ signed an agreement to merge Rafed and Union71 with Dubai-based Pure Health to create a major healthcare support services provider.

In May 2021, ADQ’s unit Senaat submitted an offer to combine its wholly owned subsidiary Emirates Steel with Arkan Building Materials Company to create an industrial group with assets worth $3.54bn.

ADQ's offer comes at a time when Abu Dhabi is seeking to diversify its economy from oil, with a focus on sectors such as advanced technology, manufacturing and tourism.

ADQ's mobility and logistics portfolio includes aviation companies such as Wizz Air Abu Dhabi and Abu Dhabi Airports.