Deal with South Korean firm offers big chance to move into complex engineering and “big ticket” infrastructure work.
Seoul // Arabtec Holding, associated with some of the UAE’s most prestigious building projects including the Louvre Abu Dhabi, has launched a joint venture with the engineering arm of the South Korean conglomerate Samsung.
Arabtec regards the deal as a “major milestone” in its new strategic direction to expand into more complex engineering and “big ticket” infrastructure work around the Middle East and North Africa.
The chief executives – Hasan Ismaik for Arabtec and Park Choong-heum for Samsung Engineering – signed the terms of the deal at a ceremony in Seoul yesterday.
“The launch of this company is a major milestone in our ambitious strategy to expand into new areas, in association with world-class partners, as part of our endeavour to consolidate our status as a key player at the regional and international levels,” said Mr Ismaik.
“The new joint-venture company is a powerful combination of construction expertise, decades of successful project management, strong engineering capability and an extensive regional network in government and business. I am confident that this combination of leading capabilities will prove a success in the near term and look forward to announcing Arabtec-Samsung Engineering’s future achievements.”
Mr Park said the new company would “build on the success of our partnership with Arabtec on some of the region’s highest-profile projects. The success of this partnership with Arabtec is part of our expansion strategy in the Middle East and North Africa region and we believe that our new company is well positioned to capitalise on the exciting growth opportunities in the oil and gas, power and related infrastructure sectors.”
The deal could also boost employment in the UAE, with the establishment of a “centre of excellence” in Abu Dhabi using Samsung technology and expertise to train Emirati engineers.
“The new company will also contribute to the human development of young Emiratis through the centre, which will train and educate Emirati engineers of the future,” said Mr Ismaik.
Shohidul Ahad Choudhury, the investment banker hired by Arabtec as its head of mergers and acquisitions, said the deal was part of a “robust business plan” put together to transform Arabtec into an engineering, infrastructure and facilities management group, in addition its expertise in contracting.
“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,” he said. “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 US$1 billion, and there are plenty of those out there, especially in petrochemicals and refineries – across the GCC region.”
He added that Arabtec was looking at a similarly structured deal with a “prestigious” global company such as Samsung to give the UAE economy an entry into the booming market for infrastructure projects but gave no indication on the timing of any announcement.
A joint statement from Arabtec and Samsung said: “The oil and gas, power and infrastructure sectors in the Middle East region are key drivers of long-term economic growth. The major projects market is gaining momentum with the region’s 100 biggest schemes currently under construction accounting for more than $304bn of capital spending.
“Activity in these sectors in 2013 and beyond is set to increase dramatically in the coming years. The top 50 projects currently planned or already under way across the region are valued at $1.56 trillion, representing a 42 per cent increase compared to 2012.”
A memorandum of understanding had been signed earlier this year between the two companies, but there was a significant change to the final deal. Arabtec and Samsung will each have 40 per cent of the venture, but the Abu Dhabi property and leisure group Tasameem Property Investment will also take a 20 per cent stake.
The original plan was for Arabtec, part-owned by Aabaar Investments, to have a 60 per cent stake.
Abaar is owned by International Petroleum Investment Company, chaired by Sheikh Mansour bin Zayed.