Hasan Ismaik strained to lift the 14-kilogram golden falcon statue, but once it was safely handed over it must have been a weight off his mind.
The chief executive of Arabtec has spent many months in negotiations over a deal between the UAE contractor and his counterpart at South Korea’s Samsung Engineering.
A memorandum of understanding was announced in April for a joint venture between the two, but such complex international corporate deals can often run aground on financial, management or cultural detail.
As if to symbolise the cultural differences between the two, the gift handed over in exchange for the glitzy falcon was a finely worked sculpture of a crane – the bird, not the engineering equipment – a Korean symbol of longevity.
Park Choong Heum, the chief executive of Samsung’s engineering business, said that he hoped the crane would symbolise the enduring nature of the deal.
For Mr Ismaik, the venture with Samsung is a transformational event. “Samsung has 20 years’ track record, they are number one in engineering. We have to learn from them,” he said at the formal signing ceremony in Samsung Engineering’s headquarters in Seoul.
If he wanted to learn how to manage corporate change, he came to the right place. In a few decades Samsung has transformed itself from a South Korea-focused chaebol (family conglomerate) into a global player at the highest level.
Thanks to its digital electronics business, it has also become one of the world’s “cool” brands, rivalling the western trendsetters Apple and Google for technological innovation.
Under Mr Ismaik, Arabtec is also undergoing a transformation. As a building contractor, it was involved in some of the big projects that shaped the modern image of the UAE, but it fell on tough times in the financial crisis.
New owners in the shape of Abu Dhabi’s Abaar Investments, itself owned by the International Petroleum Investment Company (Ipic), headed by Sheikh Mansour bin Zayed, decided a change of business direction was needed.
Instead of the traditional focus on apartment blocks and villas in the UAE, Mr Ismaik decided on a bold new strategy to capitalise on Arabtec’s expertise in construction, by moving upscale into big engineering and infrastructure projects in the booming oil-driven economies across the Middle East.
He told The National: “While the construction industry has returned to growth, which we expect to continue for the next seven to 10 years, Arabtec is pursuing a growth strategy that also includes opportunities for expansion in oil and gas, power, infrastructure, as well as affordable housing.”
That transformation involved replacing the old Arabtec management and hiring a new team to implement it, as well as a rights issue that raised US$640 million from existing shareholders in July.
One important hiring was that of Shohidul Choudhury, formerly an investment banker at Deutsche Bank and Goldman Sachs, as head of Arabtec’s mergers and acquisition unit. Sceptics who questioned the appointment of an M&A specialist to a building group missed the point: Arabtec was to be transformed strategically, corporately and financially.
An investment banker’s skill would be essential in that process.
Mr Choudhury was closely involved in the intricate negotiations between Arabtec and Samsung that paved the way for yesterday’s ceremony in Seoul.
Mr Choudhury said: “Five years ago, the growth was in construction of leisure, housing and retail projects, but now there is lots more competition and lower growth in these sectors. The margins are better in engineering, procurement and construction, and there is a huge need for infrastructure across the region. We’ll be looking at big ticket projects, upwards of $1 billion, and there are plenty of those out there, especially in petrochemicals and refineries, across the GCC region.”
He added that lots of projects were being revived in the UAE, Saudi Arabia, Qatar, Kuwait and Oman.
The next phase of Arabtec’s transition will consist of another joint venture agreement, this time in infrastructure projects, with a “similarly prestigious” name like Samsung, Mr Choudhury said.
He explained that, with the proceeds of the rights issue possibly bolstered by another call on equity holders, and a potential $450m available in the bond markets, Arabtec would have no need for further fundraising. “We are net cash positive and cash-rich at the moment. We’ve just hired two new treasurers to manage it,” Mr Choudhury said.
In five years’ time, and if all goes to plan on the Ismaik timetable, Arabtec will be a construction, engineering and infrastructure conglomerate, with a strong business in facilities management. It will be Middle East-based, but strong enough to look outside the region, possibly to Russia or Central Asia.
As Mr Choudhury said: “We’ll move out of simple pouring of concrete into higher growth areas.”
If that strategy is fulfilled, the launch of Arabtec-Samsung Engineering will be seen in retrospect as a major advance, and the Seoul ceremony as something of a historic occasion.