x Abu Dhabi, UAEThursday 18 January 2018

Al-Futtaim to spend $1bn on expansion

Company makes cars a priority over the next few years, seeking acquisitions across the region, after weathering the storm.

The Al-Futtaim Group, one of the Middle East's biggest conglomerates, is to embark on a US$1 billion (Dh3.67bn) spending spree over the next few years, seeking acquisitions across the region to bolster its car dealership arm and the rest of its empire.

Marwan Shehadeh, Al Futtaim's group director of corporate development, revealed the acquisition plans en route to the World Economic Forum (WEF) that begins today in Marrakech, Morocco.

"A budget of $1bn is not unreasonable over the next three to four years," said Mr Shehadeh. "It could also exceed that but it depends on the opportunities. If it fits with our plans, we will do it."

Al-Futtaim's acquisition drive will focus on its car sales and car parts businesses, he said, adding it would also encompass investments in other sectors.

Countries the company is targeting include the UAE, Saudi Arabia and Qatar in the Gulf; and Sri Lanka and Malaysia in Asia. Al-Futtaim is also looking at buying companies in north Africa, including Egypt, Tunisia and Morocco.

"We are in a growth mode and we have the serious intention to grow further regionally and internationally," Mr Shehadeh said.

"The forum is a perfect opportunity to connect with people for potential partnerships in [mergers and acquisitions] activity.

"We want to accelerate our growth all over, including in the UAE. We came out from the crisis in very good shape and we want to capitalise on that and take advantage of more realistic valuations."

Flush with cash after successfully navigating the global economic downturn, Al-Futtaim was looking to expand on all fronts, building substantially on its collection of businesses in the automotive, retail, electronics, engineering, financial services and property sectors, Mr Shehadeh said.

The company was already in "advanced talks" about making acquisitions in the region, he said.

"We have always been very careful," said Mr Shehadeh. "Our strength is through diversity. We have been very cautious. We haven't gone into crazy leverage or acquisitions at the top of the market, so that's the reason we got out in great shape."

Al-Futtaim's most visible asset may be its eponymous car dealership business, which stretches across the Gulf and into north Africa. But the group also runs the Hertz rental car business in the UAE, along with the Plug-Ins electronics stores, IKEA, Ace Hardware and the Marks & Spencer outlets.

Al Futtaim Carillion, its engineering joint venture, has worked on some of the UAE's biggest construction projects. The conglomerate is one of the oldest and most respected business groups in the region, having begun in the mercantile culture of 1930s Dubai.

It has grown since then into one of the Middle East's few truly multinational companies, employing more than 20,000 people in about 20 countries.

The Middle East's battle with western nations over trade and currency valuations is expected to be at the top of the agenda at the WEF.

It takes place just weeks before an eagerly anticipated summit of the Group of 20 (G20) leading and emerging economies next month in South Korea.

China, Japan, the US and Europe are caught up in a simmering dispute over monetary policy moves that will deal most effectively with global emergence from the worst economic downturn in a generation.

China and Japan are trying to keep their currencies cheap relative to the dollar and euro to maintain growth in their export-reliant economies.

The US, meanwhile, has repeatedly urged China to let the yuan appreciate in value against the dollar, even as the Federal Reserve considers printing new money to battle deflationary pressures.

These so-called currency wars are threatening to spill over into a tense political stand-off between the world's superpowers.

Given its role in global trade and the Gulf's currency pegs to the dollar, the Middle East has a lot at stake in the debate, economists say.

The best outcome for the region would be yuan exchange rates set by markets rather than by the Chinese government, says Fabio Scacciavillani, an economist at the Dubai International Financial Centre.

The uncertainty over currencies, financial regulation and the best response to the crisis, also meant many companies were sitting on the sidelines rather than deploying capital on new projects and acquisitions, Mr Scacciavillani said.

"We don't know how the financial sector reforms will impact the financial institutions and their ability to grow," he said.

"There is global uncertainty in that they don't know how this relationship with China and the US will evolve, so everyone is sitting and waiting for Godot. This is not a spectator sport. We are all in it."

The three-day WEF concludes on Thursday.