x Abu Dhabi, UAETuesday 23 January 2018

€350m ends Ferrostaal saga for Ipic

Abu Dhabi's IPIC and MAN Group of Germany ended a year of wrangling with the sale of their joint stake in Ferrostaal for €350 million

Ferrostaal was majority-owned by Abu Dhabi's International Petroleum Investment Company (Ipic) until last month.  Volker Hartmann / AP
Ferrostaal was majority-owned by Abu Dhabi's International Petroleum Investment Company (Ipic) until last month. Volker Hartmann / AP

International Petroleum Investment Company (Ipic), an Abu Dhabi investment fund, yesterday sold its majority stake in the scandal-ridden German project management company Ferrostaal.

The Abu Dhabi-owned investor in oil and industrial assets took a loss on the sale, receiving €350 million (Dh1.71bn) for its 70 per cent stake in the company from Germany's lorry manufacturer MAN, which sold it to Ipic for €450m in 2009.

A bribery scandal erupted at the European company when an internal probe in May found it had paid close to €9m to win business, and a further €81m was unaccounted for.

A month earlier, German prosecutors charged two executives with paying more than €62m in bribes between 2000 and 2007 to win submarine orders from Greece and Portugal.

Last month, Ferrostaal announced its owners had agreed to pay €149m in fines. "At the time, it seemed like a great deal for Ipic, but then the scandal broke out because of irregularities across various fields, so it turned out to not be such a great deal," says Jose Asumendi, an analyst at Royal Bank of Scotland. Industry experts believe Ipic's divestment will ultimately benefit the company.

"It's one headache less for management, they can now move on," said Martin Kohlhase,an analyst at Moody's Investors Service.

"It draws a line into the sand and that comes at a price."

Ipic expressed relief at the asset sale.

"This settlement is the outcome of very good cooperation between both shareholders, and enables Ipic and MAN to finally put their differences aside," Khadem Al Qubaisi,the managing director of Ipic, said yesterday.

Ipic has invested in a range of European assets, including Spain's largest energy company Cepsa, as well as Austria's hydrocarbon explorer and producer OMV.

It has started to become active domestically, owning the Abu Dhabi Crude Oil Pipelinethat connects Abu Dhabi's Habshan oilfields with the emerging crude transport hub in the northern emirate of Fujairah.

Ipic also owns a stake in the Austrian petrochemicals company Borealis, which is in turn invested in the burgeoning Abu Dhabi Polymers Company (Borouge) petrochemicals complex.

Ferrostaal was part of Ipic's strategy to develop its footprint in the petrochemicals industry and contribute to growth of the downstream industry in the emirate.

"Given Ipic's other investments, it would have been a good fit," said Mr Kohlhase.

Due to the specialised nature of Ferrostaal, its departure from the portfolio will not damage the investment company's ambitions, he said.

"It's regrettable, but it won't put a big dent into the overall Ipic strategy. It's only one aspect… of Ipic's petrochemicals strategy."

Ferrostaal even proved to be detrimental to Ipic's strategy as banks required guarantees from the owner to keep the company in business, Mr Kohlhase said.

With Europe struggling to shake off a growing contagion in the credit markets and avoid a renewed slide into recession, shedding its troublesome asset could allow Ipic to focus on other, more rewarding ventures.

"If you look at where the equity market is, and the kind of investment opportunities in Germany, Spain, France, there are many industrial companies out there which offer very attractive values over the long term," said Mr Asumendi.

MAN is in no mood to keep hold of Ferrostaal, and has already initiated the sale of the company to Muenchmeyer Peterson Capital for as much as €160m.

Ridding MAN of Ferrostaal will smooth the way for the integration with Swedish lorry maker Scania. Volkswagen, which owns both companies, is now free to push the integration of the two units, and to capitalise on the synergy effects of this process.


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