International Holding Company (IHC), the biggest UAE company by market capitalisation, plans to invest up to $24 billion in the next nine months and divest two to three companies as it reconfigures its portfolio across various sectors.
The Abu Dhabi-listed company, whose board is led by Sheikh Tahnoon bin Zayed, Deputy Ruler of Abu Dhabi and National Security Adviser, aims to invest mainly in mining, energy and industrial ventures to further grow its portfolio globally, its chief executive, Syed Basar Shueb, told The National.
“We have right now somewhere around $10 billion to $12 billion cash, with the divestment we have done in the two assets, Modon, and the other one Pal Cooling,” Mr Shueb said. “I can easily deploy $20 billion to $24 billion in the next eight to nine months.”
The company aims to fund its investments through a mix of debt and equity. It is also looking to continue divesting investments and reinvest further in its businesses to help them grow.
“Every 18 months, we will be doing divestment and reinvestment,” Mr Shueb said. “So I think for these 18 months, we have still two or three more divestments in order to achieve our divestment targets.”
Last month, IHC sold its 42.54 per cent stake in Abu Dhabi’s property developer Modon Holding to L’imad Holding for an undisclosed sum, in line with its policy of limiting exposure to any single sector to no more than 20 per cent.
IHC unit Multiply Group also sold Abu Dhabi’s Pal Cooling to Tabreed and Netherlands-based fund CVC DIF in a deal valued at $1.1 billion last month.
IHC has more than 1,300 subsidiaries, with investments in sectors including asset management, health care, real estate, financial services and IT.
Bullish on 2PointZero growth
Last month, the company announced the merger of three of its portfolio companies, 2PointZero, Multiply Group and Ghitha Holding, to create a Dh120 billion ($33 billion) energy and consumer sector-focused investment platform as part of its consolidation strategy.
The merged organisation will be renamed the 2PointZero Group and will continue to be listed on the Abu Dhabi Securities Exchange (ADX), uniting three platforms across sectors essential to future global growth. IHC on Wednesday appointed Mariam Almheiri as the managing director of the group and Samia Bouazza as its chief executive.
“They have all the ingredients to grow at least 15 [per cent] to 20 per cent right now, year on year … the demand of energy is not going to stop at this level,” Mr Shueb said.
Food is another large sector under the new 2PointZero Group that “can grow easily”.
“They are also into mining sector where, in the last two years, we have built the business from zero to ... producing 90,000 tonnes of copper."
The company also acquired a majority stake in the Democratic Republic of Congo’s tin producer Alphamin Resources for $367 million and "growing in that sector", Mr Shueb said.
On further consolidation within the group, management “will do whatever is best for our shareholders”, he added. “If we can create a right value for our shareholders by merging different entities, we will do that.”
Listing plans and acquisitions
The company has no plans to list its subsidiaries in the next six months but beyond then, it may consider listing one company, he said.
"We are working on a few entities, there is a pipeline of four or five always there. We are more busy with the divestment right now and growth in certain sectors," Mr Shueb said. The right opportunity could be pursued should it arise, he added.
The company is on track to double its asset base to Dh800 billion by 2030, from about Dh462 billion at the end of the third quarter, on the back of its expansion plans, Mr Shueb said.
More than 60 per cent of its assets are overseas, with the US and Indian markets dominating at 20 per cent to 25 per cent each of the total assets, and the rest being in Europe and Africa. It recently acquired a 43.5 per cent stake in India’s Sammaan Capital in a $1 billion deal to expand its portfolio in the South Asian nation.
Future expansion
The company is looking at expanding into markets including South America and Central Asia, as well as the Middle East. "We still have to grow in the region a lot because we have very little presence," Mr Sheub said.
IHC aims to expand in Saudi Arabia, the Arab world’s largest economy, and is in discussions with some of the large family offices in the kingdom. “It's a big market, we believe we can contribute a lot to their growth.”
IHC, which reported Dh84.6 billion in revenue for the first nine months of the year, is targeting at least Dh130 billion in revenue by the end of this year on the back of strong performances from its businesses, Mr Shueb said.
Vision beyond 2030
IHC will continue to grow in global markets with new investments, according to Mr Shueb.
"I definitely see a very long way to go for IHC ... with this model. What we are working on ... will always be growing because it's not a model which is centric to [the] 10 million population of the UAE," he said. "It's a global phenomenon, where we invest, we grow, we divest, and we continue investing and grow in the global market."
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.”
Global state-owned investor ranking by size
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UK's plans to cut net migration
Under the UK government’s proposals, migrants will have to spend 10 years in the UK before being able to apply for citizenship.
Skilled worker visas will require a university degree, and there will be tighter restrictions on recruitment for jobs with skills shortages.
But what are described as "high-contributing" individuals such as doctors and nurses could be fast-tracked through the system.
Language requirements will be increased for all immigration routes to ensure a higher level of English.
Rules will also be laid out for adult dependants, meaning they will have to demonstrate a basic understanding of the language.
The plans also call for stricter tests for colleges and universities offering places to foreign students and a reduction in the time graduates can remain in the UK after their studies from two years to 18 months.
