UAE Exchange sells stake to Centurion Investment

UAE Exchange sells 40 per cent of its shares to an Abu Dhabi investor, calling off plans for an initial public offering.
Dubai, 22nd October 2011. Interior of UAE Exchange at their Karama branch, on weekends lots of expatriates troop to this remittance centre. ( Jeffrey E Biteng / The National )
Dubai, 22nd October 2011. Interior of UAE Exchange at their Karama branch, on weekends lots of expatriates troop to this remittance centre. ( Jeffrey E Biteng / The National )

UAE Exchange has sold a 40 per cent stake to an Abu Dhabi investor, after abandoning plans for a share flotation.

Centurion Investment announced yesterday it would acquire the stake in the currency exchange, which first mulled plans for an initial public offering (IPO) in 2007.

The acquisition will allow the company to expand its global network of 29 branches into new markets, said BR Shetty, a partner and director at UAE Exchange.

"Better to be a big fish in a big pond," he said, declining to reveal the price of the deal.

Reuters reported that Centurion paid US$2 billion (Dh7.34 billion) citing an unnamed source.

UAE Exchange's plans for a share sale remain on hold for the time being. "In the future, of course," he said. "But not now."

Centurion previously paid $1.2 billion for a sizeable stake in NMC Healthcare, which owns hospitals in the Emirates. Both NMC Healthcare and UAE Exchange were founded by Dr Shetty.

The currency exchange, which had revealed its plans to go public last February, attracted investor attention because of its large branch network and strong positioning within the UAE's remittance sector.

The country's markets have struggled to attract global companies to list shares during a period of poor liquidity, even as markets recover worldwide and companies such as Facebook prepare for IPOs worth billions of dollars. The proceeds of Centurion's investment in UAE Exchange were solely for expansion purposes, the company said.

NMC Group previously reported experiencing difficulties obtaining funding from Emirates lenders.

UAE Exchange has Dh459 million in bank debts due in 2016, according to Bloomberg News data.

The remaining 60 per cent of the company's shares will remain in the hands of its current owners, Mr Shetty added. The investment was part of plans to diversify into a number of unrelated sectors, said Saeed Mohammed Al Qubaisi, the chairman of Centurion.

"Our strategy is to develop the performance of these companies, and to expand their activities, and ultimately place them among top companies in the UAE and the region," he said.

Centurion Investment previously paid $1.2bn for a 40 per cent stake in New Medical Centre, which had experienced difficulties securing bank finance during the downturn.

The Dubai Financial Market General Index has fallen 77 per cent from its pre-crisis peak in 2008, while the value of trading activity has collapsed during that period.

Last year, about half of the UAE's brokers went out of business and banks such as HSBC closed brokerage arms. Although the UAE's markets have rallied substantially during the past two weeks, market conditions have deterred a number of companies from listing on the Emirates' stock exchanges.

Following the collapse in UAE market liquidity, it was not the right time for companies to head to market with share sales, said Ali Khan, the head of Middle East and North Africa equity sales at Royal Bank of Scotland.

"Despite the current rally, in the greater scheme of things valuations are still very low for public companies," he said.

"It probably still isn't the right time to be considering an IPO."

Expectations of companies that had planned listings during the boom years may have led them to expect higher premiums than those they would get in reality, experts said.

"Anyone with a business that demonstrates strong fundamentals won't get the valuations they feel their businesses deserve," Mr Khan added.

An IPO of Axiom Telecom was pulled at the last minute in December 2010 because of weak demand from retail investors.

Insurance House's successful listing last year - the UAE's first since the 2008 financial crisis and prompted by regulations on insurance - almost collapsed for the same reason.

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Published: February 1, 2012 04:00 AM


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