Abu Dhabi’s Eshraq Investments to acquire Goldilocks in a share swap deal

Transaction will boost Eshraq's assets to more than $1.03bn and help diversify its portfolio

Eshraq Investments plans to acquire Abu Dhabi Global Market-based Goldilocks Investment Company. Victor Besa / The National

Abu Dhabi-listed Eshraq Investments plans to acquire 100 per cent of Goldilocks Investment Company in a deal that will boost its assets to more than Dh3.8 billion ($1.03bn), as the company seeks to diversify its portfolio and increase growth.

As part of the transaction, Eshraq will issue new shares for Goldilocks investors in exchange for their shares in the investment fund, which is managed by Shuaa GMC, a unit of Dubai-based investment bank Shuaa Capital.

The transaction values Eshraq at 40.6 fils per share, a 37.8 per cent premium of its closing price on March 28, the company said in a statement on Tuesday.

The non-cash transaction has received approvals from market regulator Securities and Commodities Authority and Eshraq’s board, and is subject to the approval of the company's shareholders.

“The proposed transaction is a win-win for both Eshraq and Goldilocks shareholders, particularly in terms of investment portfolio diversification and increased liquidity,” the board of directors at Eshraq Investments said.

“Most importantly, the acquisition of a high-performing fund like Goldilocks will enable Eshraq to increase its profitability, improve its share price and positions the company for strong business performance, while creating tangible and long-term sustainable value for Eshraq shareholders. We also expect the transaction to give us access to profitable deal flow at an early stage.”

Abu Dhabi Global Market-domiciled Goldilocks has investments in a number of blue-chip companies across the Gulf region including Dana Gas, GFH Financial Group, Salama and Takaful Emarat, among others. The fund is also an investor in companies such as music streaming platform Anghami, India’s largest EdTech unicorn Byju’s, Switzerland’s pharma tech company SkyCell and UAE’s Stanford Marine Group.

In total, it has 15 underlying investments with assets valued at Dh2.1bn, the company said.

Goldilocks generated Dh105 million in income for 2021 on the back of its investments in "profitable and strong cash-flow generating UAE-based companies", it added.

Eshraq Investments, which has a portfolio of residential, hospitality and other property projects, also swung to a profit in 2021 as revenue from commercial operations grew and finance costs fell.

The company reported a net profit of Dh38.4m last year compared with a loss of Dh80.3m in 2020 as revenue jumped 55 per cent to Dh26.2m, according to its financial statement. Finance costs slid to Dh6.3m last year from Dh8.2m in 2020.

The latest announcement comes as merger and acquisition deals in the Middle East and North Africa continue to grow. M&A deal volumes surged 66 per cent last year as the region's economies charted a strong recovery from the pandemic.

In 2021, 661 transactions worth $99bn were completed, compared with 397 deals worth $85.2bn in 2020, according to Ernst & Young.

The UAE registered the highest deal activity in terms of volume with 303 transactions, while Saudi Arabia attracted the most M&A capital, worth $47.4bn, according to the consultancy. Egypt, the Arab world's third-largest economy, also reported robust activity in 2021 with 118 deals worth $7.7bn.

EY, Baker Botts and CBRE are acting as the financial adviser, legal adviser and real estate valuation adviser to Eshraq on the deal, while PwC and White & Case are acting as the financial due diligence and legal adviser to Goldilocks.