Damac chairman Hussain Sajwani launches $595m bid to take listed developer private

Company's founder and majority shareholder submits bid for the 28% of shares he does not already own

Damac founder and chairman, Hussain Sajwani, at a panel at Salt Abu Dhabi, UAE, December 11, 2019. Antonie Robertson / The National

Dubai’s property developer Hussain Sajwani is planning to take Damac Properties private by buying its remaining shares through an investment vehicle he owns.

Mr Sajwani, who currently owns 72 per cent of the company, submitted an offer to acquire the remaining shares at Dh1.30 per share, amounting to about Dh2.185 billion ($595m), according to a document filed at the Dubai Financial Market, where the shares currently trade. He has also resigned from the board as chairman after making the bid due to a conflict of interest.

Maple Invest, a British Virgin Islands company owned by Mr Sajwani, "has an intention to make a voluntary and conditional offer to acquire shares in the issued and paid up share capital of Damac that will result in it owning no less than 90 per cent and up to 100 per cent" of the company's shares, the statement said.

Once Mr Sajwani receives acceptance from more than 90 per cent of the shareholders, he intends to submit a mandatory offer for the remaining shares under a "squeeze out" agreement. He then intends to delist the company, the statement said.

Damac, which has built the Middle East's only Trump-branded golf course, has reported six successive quarterly losses and its share price has fallen by about 68 per cent from its most recent peak in August 2017. The shares fell a further 1.5 per cent in trading on Tuesday, closing at Dh1.28 per share.

The company reported a loss of Dh189.6 million in the first quarter, compared with a loss of Dh106.1m in the same period last year. Revenue fell to Dh642.2m, from Dh1.23bn in the same period last year.

Damac will hold a board meeting on June 14 to discuss the offer, according to the statement.

The company has projects in a number of countries including the UAE, Lebanon, the UK, Jordan, Saudi Arabia and Qatar. As of March 31, Damac had delivered 33,334 homes and has a development portfolio of 33,000 more units at various stages of progress and planning, according to its website.

The UAE property market, which softened due to a three-year oil price slump that began in 2014 and oversupply concerns, is showing signs of recovery as people stuck at home look to upgrade to larger properties amid a remote working and learning trend sparked by the pandemic. Transaction values hit a four-year high of Dh11.1bn in May.

Economic support measures and government initiatives – such as residency permits for retirees and remote workers and the expansion of the 10-year golden visa programme – have also helped to improve sentiment.

“We believe that the offer from its largest shareholder comes at a turning point for the company," Junaid Ansari, head of investment strategy & research at Kamco Invest, said.

"In its recent quarterly earnings, it was reported that the losses mainly reflected lower revenue recognition as many projects are nearing completion. In addition, the real estate market in Dubai has seen a strong recovery over the last few months and the trend is expected to continue in the near-term."

Both these factors should lead to more opportunities being created in one of the key real estate players in Dubai’s real estate market, he added.

The bid is not likely to have any effect on the ratings of bonds issued by Damac Properties' wholly-owned subsidiary, Damac Real Estate Development, S&P Global Ratings said.

"We understand that delisting will not have any effect on Damac's balance sheet, since the consideration will be paid by the acquirer. We also note that Damac cannot distribute dividends due to restrictions under its bond indenture. Therefore, we expect Damac's credit metrics will be unchanged," the ratings agency said.

It has a 'B' rating on Damac's bonds, which is below investment grade, with a negative outlook.