Abu Dhabi: General Holding Corporation (Senaat), part of ADQ and the sole shareholder of Emirates Steel Industries, announced that it has submitted an offer to the Board of Arkan Building Materials Company.
The offer sets out the principal terms and conditions on which Senaat would transfer Emirates Steel, a leading integrated steel producer in the Middle East, to Arkan, a construction and building materials manufacturer in the UAE.
“We believe the combination of Emirates Steel and Arkan presents an excellent opportunity for Arkan’s shareholders, offering increased scale, financial strength, resilience, and value via a best-in-class player with international ambitions,” said Khalifa Sultan Al Suwaidi, Chairman of Senaat.
The combined group will compete alongside global industry leaders. With enhanced corporate governance and attractive shareholder returns, the proposed transaction would make the combined group the largest listed entity of its kind in the UAE. Additionally, it would mark the first time that investors will have access to a steel producer on a UAE public market, which is expected to have a positive impact on overall demand and liquidity for the combined group’s shares.
With total assets of approximately Dh13 billion, the combined group would benefit from a sustainable balance sheet with a resilient long-term capital structure and a cash-generative business, and the transaction will be highly accretive to earnings per share.
The combined group is optimally positioned to benefit from the post-Covid recovery anticipated in the UAE and the regional construction sectors, which are expected to witness an acceleration in infrastructure projects as a result of various governmental stimulus programmes locally and regionally.
The combined group will also play a key role in delivering the UAE’s Industrial Strategy "Operation 300bn" through the production and distribution of market-leading products to ensure local industries are a driving force of a sustainable national economy.
Terms of offer
Under key terms of the offer, in consideration for the transfer of Emirates Steel, Arkan would issue to Senaat a convertible instrument that would automatically convert into approximately 5.1 billion ordinary shares in the capital of Arkan upon closing of the transaction. The price at which the convertible instrument will convert into shares in Arkan is Dh0.798 per share.
The offer implies an equity value of approximately Dh1.4 billion for Arkan. Post completion, Senaat would own approximately 87.5 percent of the entire issued share capital of the combined group.
If the Board of Arkan recommends the offer, and its shareholders subsequently approve it, then the transaction could close during the second half of 2021, subject to the receipt of all relevant governmental and regulatory approvals.
Rothschild & Co are acting as financial advisor and Allen & Overy LLP are acting as legal advisor to Senaat and its shareholder.