Bahrain’s Mumtalakat sovereign wealth fund targets foreign acquisitions to fuel expansion

Bahrain’s sovereign wealth fund is targeting more acquisitions this year as it seeks to double its assets in the next five years.

Mumtalakat, which posted net profit growth of 11 per cent last year to 91.6 million Bahraini dinars (Dh892.5m), plans to grow its assets, which reached US$7.2 billion at the end of June.

Profit rose despite a 64.6 per cent increase in impairments at 34.4m dinars, the wealth fund said. Revenue grew 11 per cent to 1.2bn dinars.

“There are two ways that we grow our assets,” said Mahmood Al Kooheji, the chief executive. “Initially, the portfolio that we already have, there is potential to grow there. The other angle is that we are looking internationally and globally for new acquisitions to increase the value of the portfolio that we have.”

Mumtalakat has stakes in a number of big Bahrain companies and was last year able last to increase its profit through them.

Aluminium Bahrain (Alba), the country’s aluminium producer, reported a net profit last year of 20.8 per cent to 96.4m dinars. Bahrain Telecommunications Company (Batelco), the country’s biggest telecoms operator, grew its net profit by 12 per cent to 17.7m dinars.

Mumtalakat is looking for deals in North America, Europe as well as the Arabian Gulf region. It has truck a number of deals with partners.

The sovereign wealth fund was part of a group of companies – including Dubai’s Fajr Capital and the US-based private equity and advisory firm Blackstone – that bought a significant minority stake in the UAE’s Gems Education. In partnership with Bahrain’s alternative investment firm Investcorp, Mumtalakat has also bought the US private education company Nobel Learning and the US-based software and services firm PRO Unlimited.

“Usually we go for a significant minority stake because we believe we need to have other partners,” said Mr Al Kooheji. “We like the management to be involved with the company as well – we don’t want to go and take over a business 100 per cent ourselves. We have done three deals last year, with a total value of almost $900m and our share was roughly one third of that.”

Mumtalakat focuses on seven sectors that include the financial sector, industrial and manufacturing, consumer and health care, property (mainly in Bahrain), logistical and general services.

The firm is on a buying spree despite the drop in oil prices, which is affecting Bahrain’s economy. It remains interested in acquisitions and is not planning any asset sales.

“We don’t get income from the government,” said Mr Al Kooheji. “Our two sources of income is the dividend we receive from our portfolio companies and the borrowing we make from the capital market.”

The firm, which raised a loan and a sukuk at the end of last year to refinance existing obligations, does not plan to got to the debt market any time soon.

“I do not think we will go to the debt market because we have done refinancing for the sukuk and these refinancings will mature, one in five years and another in seven years,” said Mr Al Kooheji. “If we have a deal ready we will approach the capital markets to finance the deal we are doing. All the deals we do are partially funding and partially equity.”

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