Drake and Scull, an engineering firm based in Dubai, has bought control of a wastewater treatment unit of the German construction company Bilfiger Berger for Dh145 million (US$39.4m) as it seeks to expand its services in the Gulf. The company acquired an 82 per cent stake in Passavant-Roediger, which provides municipal and industrial purification services and household refuse treatment.
Drake and Scull, which has more than Dh5 billion worth of projects across the MENA region, plans to go on an acquisition drive for undervalued companies as it seeks to take advantage of the global construction slowdown and strengthen its capacity. Khaldoun Tabari, the chief executive, said Drake and Scull had a cash pile of about Dh500m to fund purchases. "The market right now offers opportunities, which is why we believe we can get these at a very good price," he said.
The acquisition is the first by Drake and Scull since its listing on the Dubai Financial Market in March and will be followed by the purchase of two more companies, in Qatar and Kuwait, by the end of the year. The company has weathered the downturn better than rivals who were overexposed to residential building, which has slowed dramatically this year as developers cancelled some projects and slowed payment on others.
Drake and Scull made a net profit of Dh239m in the first nine months of this year, up nearly 50 per cent from the same period last year. The stock has gained more than 28 per cent this year compared with a 31 per cent advance by the Dubai Financial Market General Index. Mr Tabari said that while there had been some issues collecting payments from clients, they were not "detrimental". "Everybody in the chain is affected," he said. Drake and Scull expects its planned acquisitions to help it expand across sectors including infrastructure and water and power, where regional governments in particular are continuing to spend.
The move to buy Passavant-Roediger, which already has projects in the UAE and Saudi Arabia among other Middle East locations, will help the company tap new contracts in the fast-growing wastewater sector as Gulf economies increase spending in new sewage treatment plants to accommodate rapidly expanding populations. Its existing business has also prospered. Drake and Scull has won seven contracts so far this year worth a combined Dh2bn, with the most recent being a Dh400m order last month to supply mechanical and electrical services on a housing project in Abu Dhabi.
The company is targeting contracts in North Africa as part of its expansion plans. It is also working on a contract to build a district cooling plant in Sudan and is bidding for projects in Libya. @Email:firstname.lastname@example.org