Drake & Scull on acquisition path

Drake and Scull, a Dubai-based mechanical, engineering and plumbing firm, is negotiating to acquire three GCC construction companies as its seizes expansion opportunities in the economic downturn. The firm is also preparing to list on the Dubai Financial Market, making it the first UAE company this year to launch an initial public offering (IPO). Drake and Scull said it would buy almost half of a Saudi Arabian civil works contractor as well as acquire a mechanical, engineering and plumbing (MEP) contractor in Saudi Arabia and one in Qatar. The company said it had Dh1.1 billion (US$299 million) in available capital for the deals, which were expected to be finalised this year. "We are in the final stages and by the third quarter, we will hopefully have acquired three distinct companies," said Khaldoun Tabari, the chief executive of Drake and Scull. "They will add a substantial percentage increase to our turnover and profitability for the year 2009." Mr Tabari said the economic downturn presented an opportunity for well-capitalised construction companies to buy struggling firms to strengthen their capabilities in key areas such as infrastructure, where regional governments are continuing to spend. "It is clear that this is the right time for all of us to be looking for companies that are not totally valued," he said. "The stock price right now is not valuing companies as they were five or six months ago. So yes, companies are undervalued and some of them need cash, and we have the resources and the talent to do it." Drake and Scull has Dh5bn worth of projects and has been shielded from the slowdown in building construction because of its work in the infrastructure sector. The company is focusing on engineering work in water, power and district cooling plants, as well as airport projects. Apart from Dubai, where the Government will spend about Dh36bn this year on improving the emirate's transport and social infrastructure, opportunities are arising in other GCC countries as well as north Africa, a key market for Drake's growth plans. Earlier this month, the company won a Dh36.7m contract for a district cooling plant in Sudan, and it is bidding for the MEP contract for an airport project in Libya. "For the past seven or eight months we've been focusing on infrastructure, water and power as a business stream, rather than the civil business stream, which is a policy that's paid off," said Mr Tabari. "The future will be in infrastructure work for our company, and so it will be in Qatar, Saudi Arabia, Sudan and Libya. Very little infrastructure has been built in countries like Sudan and Libya, so this is an opportune time for companies that have good management and infrastructure to go there." To help with its expansion, Drake is looking to fill 100 jobs across the company. Recent redundancies in the construction industry are making it easier for the company to find suitably qualified employees. "We believe this is the opportune time for us to get the right talent," said Mr Tabari. Drake filed all documents for the IPO process to the Emirates Securities and Commodities Authority (ESCA) on Nov 16 and expected approval "any time now", he said. Drake will be the first MEP company in the UAE to publicly list. agiuffrida@thenational.ae