Abu Dhabi-listed Arkan Building Materials Company has secured board approval to acquire Emirates Steel as it positions itself for expansion in the post-Covid-19 pandemic recovery.
Arkan will acquire Emirates Steel from Senaat, which is part of Abu Dhabi's holding company, ADQ. The deal was announced in May this year.
“The proposed transaction would create a listed national champion in the building materials and construction sectors, with strong potential for growth in the UAE and internationally,” Arkan said in a statement on Thursday.
“The combined entity will be optimally positioned to benefit from the post-Covid recovery anticipated in the UAE’s and the region’s construction sectors, thanks to an expected acceleration in infrastructure projects as a result of various government stimulus programmes locally and regionally.”
Under the terms of the proposed deal, Senaat will transfer Emirates Steel to Arkan for a convertible instrument that would automatically convert into approximately 5.1 billion ordinary Arkan shares upon completion of the deal.
The conversion price of the instrument is set at Dh0.798 per share, which values Arkan at about Dh1.4bn. Following the conversion, Senaat would own 87.5 per cent of the entire issued share capital of Arkan.
“The deal has substantial value-enhancing potential and we expect it to be accretive for Arkan’s shareholders,” Jamal Al Dhaheri, chairman of Arkan, said.
“It will strengthen Arkan’s balance sheet and financial performance, deliver greater international scale, and position Arkan to become an entry point for investing in a key regional sector while playing a key role in the UAE’s Industrial Strategy Operation 300 Billon.”
The UAE aims to more than double the contribution of the industrial sector to the country's overall economic output to Dh300bn by 2031, from Dh133bn currently as part of the new industrial strategy announced in March.
Senaat, which manages more than Dh27.2bn of industrial assets, has holdings in metals, oil and gas services, construction and building materials and food and beverages. In March 2020, ADQ assumed the ownership of Senaat, following which the conglomerate has been consolidating its holdings.
In January, Senaat’s food and beverage subsidiary Agthia completed its merger with Al Foah, the world’s largest date processing and packaging company. Agthia and Al Foah are both owned by ADQ through Senaat.
In February, Abu Dhabi's National Petroleum Construction Company merged with the National Marine Dredging Company. Before the merger, ADQ held a 32 per cent stake in ADX-listed NMDC and was the majority owner of NPCC through Senaat.
ADQ holds government stakes in a broad portfolio of companies, including Abu Dhabi Airports, Abu Dhabi Ports, Emirates Nuclear Energy Corporation, Etihad Rail, Abu Dhabi Securities Exchange, healthcare operator Seha and media hub TwoFour 54, among others.