Drake and Scull to go public

The Dubai-based construction firm, will list on the Dubai Financial Market on March 16.

Drake and Scull, a Dubai-based construction firm, will list on the Dubai Financial Market on 16 March, making it the first UAE company to launch an IPO this year. It is also the first mechanical, engineering and plumbing (MEP) contractor in the UAE to publicly list. Drake and Scull started the IPO process in July last year when it offered 55 per cent of the company to the public. The IPO was 101 times oversubscribed.

Around 45,600 subscribers applied for shares, which were priced at Dh1 each, investing funds totaling Dh124bn (US$33.7bn). "The main focus of our strategy is to expand across the MENA region with the aim of reaching out to a new customer base through acquisitions, joint ventures and organic growth," said Khaldoun Tabari, Drake and Scull's chief executive and vice-chairman. "This will put us in excellent shape at a time when certain markets are witnessing an economic slow down. Our aspiration now is to expand our civil contracting services, in addition to our traditional MEP activities in order to accommodate the demand in these growing markets."

Drake and Scull underwent the toughest part of the IPO process last summer, just before the financial crisis hit the world economy. Analysts say that while it is a good sign that the company is ready to trade publicly, it's not necessarily an indication of the ability to raise capital in the current environment. "For the most part, the hardest part of an IPO is the actual placement with investors," said one analyst. "This one was done before the big issues came out in the US with the banking system and the real estate market started to collapse, and so it was oversubscribed.

"It is positive that's coming to the market and is going to trade. But in terms of IPOs, the real positive sign would be an actual IPO being placed in the current environment." Earlier this week, Drake and Scull said it would acquire three GCC construction firms this year as it seizes opportunities in the downturn that will allow it to expand. The company, which has Dh1.1bn in available capital, will buy more than half of a Saudi Arabian civil works contractor as well as acquire an MEP contractor in Saudi Arabia and one in Qatar. The deals are expected to close by the third quarter of this year.

Drake and Scull also plans to strengthen its infrastructure, water and power division as well as target more contracts in north Africa. In January, the company won a Dh36.7mn contract for a district cooling plant job in Sudan and is bidding for the MEP contract for an airport project in Libya. It is currently working on 35 projects across the region worth a combined Dh5bn. [e-mail]