Gulf Capital plans to sell off the remainder of its stake in Gulf Marine Services over the next two years after generating gains of more than US$600 million through the firm’s initial public offering.
Through its buyout fund, Gulf Capital reduced its shareholding in GMS from 80 per cent to 49.7 per cent last week through the offshore contractor’s IPO on the London Stock Exchange.
The deal marks one of the most lucrative private equity exits in the Middle East and gives a fillip to the region’s fledgling buyout industry.
“The GMS investment represents the template for future control growth buyouts in the Middle East and is a good testimony of the strong returns that can be generated from private equity in the Gulf region,” said Karim El Solh, chief executive and managing partner of private equity at Gulf Capital, the Abu Dhabi-based private equity company.
Gulf Capital snapped up GMS in 2007 when it was mainly focused on the UAE market. Since then the company has grown its operations into the GCC, the Mediterranean and southern North Sea, operating self-propelled, self-elevated support vessel fleets for clients in the energy sector. Its profit has grown 11-fold over the same period.
“The rest of the stake [in GMS] we will sell in the open market over the next two years,” he said. “As a private equity firm, we are in the business of buying, growing and eventually selling our investments.”
The GC Equity Partners II Fund – which was set up in 2009 largely with commitments from foreign investors – has now generated gross gains in excess of $600m after the IPO and an earlier dividend distribution in March last year. The fund had a size of US$530m.
Mr El Solh defended the decision to list GMS in London, instead of locally. UAE officials are keen to encourage more listings in local markets but GMS and Damac Properties have been among UAE-based companies to list in London in recent months.
He said the capital structure rules of UAE markets would not allow Gulf Capital to fully exit fully from GMS.
“We couldn’t exit through a local IPO. You do an IPO here by doing a 55 per cent capital raise. Had we looked to finance the growth of the business we could have considered a local IPO, but here after seven years we were ready to fully exit so we had to go to a global exchange where we could sell down shares at IPO.”
In addition, 40 per cent of GMS’s revenues stemmed from the UK market, he said.
With the GMS IPO under its belt, Gulf Capital is now considering sales of other assets in its portfolio. One such potential asset sale is Metito, a UAE-based water company, which has expanded into 22 emerging markets. Gulf Capital owns about 56 per cent of the company.
“We’ve held it [Metito] for eight years,” said Mr El Solh. “Typically, the funds we invest in our 10-year funds. We will look at monetising the investment within the next two years.”
With 80 per cent of GC Equity Partners II Fund invested, Mr El Solh said there was scope for two more transactions in the region. The company is focused on what he describes as “defensive sectors”, such as health care and food and water.
“We have come out with a new moniker: we are very focused on controlled-growth buyouts,” he said. “We’re acquiring a majority stake but we’re funding and supporting the business to the maximum.”
tarnold@thenational.ae
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