DIC is going to sell 40% of M'Sharie, and if Mr Kalban's valuation is correct, DIC could end up with AED 640 million from it. How much of that would be profit? That could boost 2008 Q2 earnings nicely if it's booked then. Or would it end up in 2008 Q3 accounts?
But whatever happened to the M'Sharie IPO? Does the private sale mean DIC has decided against it?
DIC share price was trading between AED 4.25 and 4.37 today, relatively unchanged from yesterday's 4.31 close price. The other news that seemed to have little effect was DIC dividends - 10% shares instead of cash decided at yesterday's AGM.
Either that or one of the news items was pushing price up and the other was pushing it down ...
Gulf News 24 April 2008:
M'Sharie to offer 40% stake to private investors on May 8
By Shakir Husain, Staff Reporter
Dubai: M'Sharie, the fully owned private equity arm of Dubai Investments (DIC), said it will offer up to 40 per cent of its shares to Gulf investors in a private placement next month.
Thirty-five investors from the UAE and other Gulf countries have shown interest in acquiring a stake in the company, managing director Abdul Aziz Al Serkal told Gulf News.
"We will offer between 30 and 40 per cent to a maximum of 10 investors. We are looking for partners who can help in our expansion outside the UAE," he added.
The private placement will take place on May 8, and all legal formalities will be completed by the end of June, Al Serkal said.
M'Sharie's portfolio comprises 19 UAE-based companies, which mainly make products for the construction industry. These include laboratory furniture maker Labtech, piling and shoring work firm Stromek Emirates and aluminium fabricator Folcra Beach International.
The company focuses on the manufacturing, trading and service industries in the region for potential acquisitions. The private placement exercise is a step before an initial public offering (IPO) in two years.
Al Serkal said the company is keen to grow in large markets such as Saudi Arabia.
Khalid Bin Kalban, CEO, Dubai Investments told Gulf News in an interview in January that "we believe the value of M'Sharie at this point of time is Dh1.6 billion."
Dubai Investments is one of the largest publicly-traded holding companies in the UAE and reported a net profit of Dh1.5 billion in 2007.
Its revenues jumped 85 per cent to Dh3.7 billion on the back of strong property sales and return on equity investments.
M'Sharie, a DIC subsidiary, is selling off 40% to some private investors. That could mean AED 0.5-0.6 billion extra revenue appears in DIC financial statements this year (this report says M'Sharie is valued at AED 1.3-1.5 billion)? Not sure if it will appear in Q2 or Q3.
Dubai Investments subsidiary to sell 40% in private placement
by John Irish
M'Sharie, the private equity arm of Dubai Investments Co. (DIC), is selling a 40 percent stake in a private placement and expects to offer shares to the public within two years, an executive said.
"We are closing a private placement by June 30 where we are offering 40 percent of equity to five or six strategic investors of the Gulf region," M'Sharie Chief Investment officer G. Bala Subramanyan told newswire Reuters on the sidelines of a private equity conference.
M'Sharie is valued at between 1.3 billion dirhams ($353.9 million) and 1.5 billion dirhams, Subramanyan said.
"We want to have a higher reach in the Gulf region," he said, adding that Gulf International Bank is advising on the sale.
Subramanyan said M'Sharie planned to sell shares to the public in an initial public offering in 18 to 24 months, adding that the stake sale would be determined by governmental "regulations".
"It will make us a more regional company with a better reach," he said.
M'Sharie has 17 investments valued at about 2.5 billion dirhams with focus primarily on the construction and manufacturing sector.
Subramanyan said the firm expected an internal rate of return on its investments of "more than 50 percent".
"We are working on four new deals, which we expect to close in September," he said, adding the deals would be in the construction, manufacturing, and media sectors and also see the merger of two of its existing firms with a competitor.
The transactions would be worth about $20 million each.
Dubai Investments, whose businesses range from glass-making to pharmaceuticals, posted its biggest profit ever in the first quarter on gains in the fair value of its investment property and real estate sales.
Its shares closed 2.25 percent down on Monday. The stock is up more than 15 percent this year, outperforming Dubai's main benchmark, which is down 5.61 percent.
Dubai Investments sells a 40% stake in M'Sharie for AED 400 million. I presume that's Revenue, not Profit, since the DIC 2008 Q3 financial statements (released 30 October 2008) say DIC gained AED 235 million from the sale of its MSharie shareholding.
Press Release 23 September 2008:
Dubai Investments raises Dhs400m by divesting 40% stake in M'Sharie
Dubai Investments has divested 40% of its shareholding in M'Sharie, its private equity arm, via a private placement targeted towards selected strategic investors across the GCC.
The private placement was oversubscribed by more than 100%.
Valued at Dhs1bn, M'Sharie is the leading corporate private equity firm in the UAE and holds ownership interest in 16 companies operating in diversified businesses, of which 14 are majority or fully owned subsidiaries and 2 are joint venture affiliates. The divestment of M'Sharie will allow Dubai Investments to raise a capital of Dhs400m.
Commenting on the divestment, Khalid Kalban, MD and CEO of Dubai Investments, said: "The private placement of M'Sharie is a strategic move aimed at establishing a strong presence for the company within the GCC market and ensuring its continual growth by offering shareholding to a select group of investors from UAE & GCC."
"By divesting a minority stake, we put ourselves in a better position to enhance M'Sharie's performance through the introduction of commercial relationships from new shareholders, and form strategic alliances that could significantly boost the expansion of M'Sharie's acquisition activities to other GCC countries," Kalban added.
Regional investors who have acquired an equity stake in M'Sharie as part of the private placement include National Bonds Corporation (UAE), Gulf International Bank (Bahrain), Al Mal Capital (UAE), The First Investor (UAE), Al Arif Investment (UAE), Abdulaziz Alajlan Sons (KSA) and Ali Bin Hassan Dayekh (Dammam).
The legal formalities are expected to be completed by the end of September; thereafter, a new Board of Directors will be constituted for M'Sharie.
Gulf International Bank were the placement agents for the deal, and were responsible for advising DI on the structure of the placement process as well as on conducting the financial due diligence of M'Sharie and its group companies. Clyde & Co. were the legal consultants.
Referring to the overwhelming investor response to the shareholding offer, Kalban said, "The massive oversubscription of the private placement reflects the credibility that M'Sharie has built within Gulf markets as a successful investment firm. We look forward to working closely with the new shareholders and build upon the strong foundations of M'Sharie to reinforce its position as the premier private equity firm in the GCC region."
M'Sharie has a consistent track record of growth and profitability. Between 2004 and 2007, the company achieved a Compounded Annual Growth Rate (CAGR) of 28% in total revenue and 62% in net income of portfolio companies. M'Sharie boasts unrivaled access to quality investment opportunities through its extensive industry experience as well as through the network of its management team and that of Dubai Investments. The company is constantly targeting new investment opportunities for expanding its investment portfolio.
M'Sharie's investment strategy of acquiring companies with growth potential at attractive valuations is demonstrated by its excellent track record of investments, which has resulted in a robust return on equity (ROE).
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