Mubadala Investment Company, an Abu Dhabi government-owned strategic firm with US$127 billion in assets, plans to take Emirates Global Aluminium (EGA) public through a share float next year, said Mubadala's group chief executive said.
"We hope to take this company [EGA] public in 2018," Khaldoon Al Mubarak said at the Future Investment Initiative conference in Riyadh.
“It’s a great story,” he said of the company’s evolution as a global industrial champion but did not give details of the planned initial public offering.
EGA, which is jointly owned by Mubadala Investment and Dubai government sovereign wealth fund Investment Corporation of Dubai, was formed after the 2013 merger of Dubai Aluminium and Emirates Aluminium of Abu Dhabi. The company has already appointed Bank of America Merrill Lynch, Goldman Sachs and JP Morgan to advise on the IPO, according to Reuters.
IPOs have dried up recently on regional stock exchanges, including the UAE's two main securities exchanges as investors remain cautious amid slowing economies. Firms are also seeking higher valuations for their businesses and have put listing plans on hold.
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Stock market activity in the UAE, however, is expected to be boosted, with some large share floats slated for this year and next. Emaar Properties, the biggest listed developer in the country, confirmed plans to sell 20 per cent of its real estate development businesses in November.
Abu Dhabi National Oil Company may also sell shares in its Adnoc Distribution unit, which includes more than 300 service stations throughout the UAE. The company could be valued up to $14bn, making it potentially the largest transaction on local equity markets since the DP World listing in 2007, according to Bloomberg.
An EGA IPO next year could be another large-ticket deal to come to the market. Mr Al Mubarak described the company as an "industrial powerhouse", in September and said it was performing strongly.
“What I can say right now is the company is growing its value chain proposition very well. Our aluminium smelters in both Taweelah and Jebel Ali are performing extremely well, both in terms of cost and in terms of profitability,”
Mr Al Mubarak said at
the time.
The company, which has made significant investments in an alumina refinery in the UAE, expects to have operations across the aluminium value chain in 2018, when its refining facility is expected to come online.
The firm has already invested $1.2bn in in bauxite mining in Guinea, which has some of the best reserves the lowest cost of production and and has two smelting facilities at Taweelah in Abu Dhabi and Jebel Ali in Dubai.
It currently serves more than 350 industrial customers in 60 countries around the world and 8 per cent of EGA production is value-added products, according to Mr Al Mubarak.
"In terms of the GDP contribution to the UAE, we contribute about $5bn per year," he said.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
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