Dubai Aerospace is set to embark on the acquisition trail after selling a major maintenance business in the United States.
The Dubai aviation company said yesterday that it sold its Arizona-based aviation services unit, StandardAero, to the private equity firm Veritas Capital.
DAE bought StandardAero from Carlyle Group in 2007.
While DAE did not disclose the value of the sale, Reuters estimates the transaction could be valued at about $1.8 billion.
DAE said it would “redeploy capital and refocus its efforts on building an aerospace footprint anchored in Dubai”.
DAE, which came into being in 2006, was created to support Dubai’s growth as an aerospace hub and boost the emirate in the aircraft leasing business.
“We will focus on both organic and inorganic opportunities,” said the managing director of the company, Khalifa Al Daboos.
“DAE Capital will also aggressively acquire aircraft assets to expand its aircraft leasing portfolio with a current net book value of $3.7bn,” Mr Al Daboos said. StandardAero provides engine maintenance, repair and overhaul for commercial and military aircraft.
“StandardAero is one of the world’s largest independent MRO platforms with clients in over 70 countries,” said Mr Al Daboos. “This transaction will allow StandardAero to accelerate its growth by leveraging Veritas’ global relationships and in-market presence,” he added.
Moelis & Company and Freshfields Bruckhaus Deringer advised DAE on the deal.
Last month, DAE reported a 43 per cent increase in its net profit for 2014, as its operations continued to recover since the global financial crisis.
The Dubai-based government enterprise achieved a net profit of Dh586 million for 2014, compared to Dh410m a year earlier.
The company scaled back its expansion plans after the 2008 financial crisis, cancelling several high-profile orders, with many senior executives leaving in 2011.
But by November 2013, the company was taking delivery of three Boeing 777-200 freighters, which have been placed under long-term lease with Emirates.
In 2014, DAE ordered 40 aircraft from the French-Italian manufacturer ATR in a deal worth $988m. Deliveries are scheduled between 2015 and 2018. DAE has two divisions: engineering, which maintains, repairs and overhauls aircraft; and Capital, which is the region’s largest aircraft leasing firm.
selgazzar@thenational.ae
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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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