Dubai Parks and Resorts, the themed leisure venture, will bolster the proceeds of its forthcoming initial public offering with a Dh4.2 billion loan arranged by the US investment bank Goldman Sachs.
The company, which is planning a Dh10.4bn theme park complex in the emirate by 2016, has confirmed that it will seek some Dh2.5bn by way of an offering of shares on the Dubai Financial Market later this month.
A 40 per cent chunk of the company will be offered for sale by Meraas Holding, the government-owned developer, giving the parks unit a market valuation of Dh6.3bn.
Formal documents accompanying the planned IPO listing revealed that Goldman Sachs has structured and led a Dh4.2bn syndicated facility for the company, underwritten by Abu Dhabi Commercial Bank, Commercial Bank International, Emirates NBD and Noor Bank.
The total cost of the project, which includes Hollywood and Bollywood-style theme parks, a Legoland attraction and a four-star hotel on a 16 million square feet site, is estimated to be Dh10.4bn, of which Dh8.7bn is construction costs. “The company believes these amounts should be sufficient to meet its budgeted development costs but it cannot be sure that this will be the case,” the document says.
In addition, Meraas has guaranteed any potential cost overruns with interest-free loans. Meraas has already put Dh3.8bn of equity into the project, including land with a value of Dh896 million.
“With Dubai’s status as a leading global tourist destination continuing to grow, there exists an exciting opportunity to enhance the emirate’s leisure, entertainment and retail offering,” said Raed Al Nuaimi, chief executive of Dubai Parks.
Dubai is planning to attract 20 million tourist visitors by 2020, double its current level, with the Dubai Parks project forecast to attract 6.7 million visitors in its first full year of operations.
Shares in the IPO will be priced at Dh1 each, as UAE regulators specify. Of the 40 per cent of the company shares up for sale, 10 per cent will be reserved for retail investors, with 25 per cent for institutional investors and high net worth individuals.
Another 5 per cent of the offer is reserved for Emirates Investment Authority, the federal investing body which has a right to subscribe to new issues in the UAE.
Mr Al Nuaimi said that he would welcome foreign shareholders. “Dubai Parks is a proxy for Dubai tourism, and that will be attractive for international shareholders,” he said.
Meraas has already put Dh3.8bn of equity into the project, in the form of initial capital injection, costs and land. “The project is fully funded,” Mr Nuaimi said.
“With Dubai’s status as a leading global tourist destination continuing to grow, there exists an exciting opportunity to enhance the emirate’s leisure, entertainment and retail offering.
“The project will benefit from a prime and easily accessible location, partnerships with world-renowned brands, industry leading operators and a wide range of attractions catering to visitors of all ages, both from the Middle East and beyond.
“With the early stages of development already under way, we are aiming to provide investors with access to a high growth, high return, family entertainment business which will become one of the cornerstones of the Dubai entertainment landscape,” he added.
Mr Al Nuaimi estimated that 45 per cent of the infrastructure for the parks was in place, and more than half the contracts had been placed.
Dubai Parks has partnered with international operators who have extensive experience in theme park operations. Parques Reunidos of Spain, the second largest operator in Europe, will operate Motiongate and Bollywood Parks; Merlin Entertainments, another European operator, will operate Legoland Dubai. Hotel Lapita will be managed by Luxury Hotels International Lodging, a Marriott company.
Meraas expects interest in the IPO to be heightened by Dubai’s rapid expansion in tourism. It was recently rated the fifth most visited city in the world, with 11.95 million overnight visitors, ahead of New York, Hong Kong and Milan, according to the credit card operator MasterCard.
Approximately 3 billion people live within a four-hour flight of Dubai, according to the accounting firm PwC.
Goldman Sachs, Emirates Financial Services and HSBC are joint global coordinators and bookrunners for the IPO. EFG Hermes and Shuaa Caapital are also working on it.
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