Goldman Sachs, one of the world's biggest investment banks, has given the Middle East construction sector a vote of confidence by investing in Drake & Scull.
Goldman Sachs in $40m boost for Dubai's Drake & Scull
Goldman Sachs, one of the world’s biggest investment banks, has given the Middle East construction sector a vote of confidence by investing in the Dubai-based contractor Drake & Scull International.
In a stock market announcement yesterday, DSI said Goldman Sachs International, part of the New York-based investment house, had bought warrants worth Dh147 million (US$40 million) that represented about 8.5 per cent of the company.
The warrants allow Goldman to buy shares in Dubai’s second-biggest contracting company over the next five years at an agreed – but undisclosed – price and can be exercised by the bank after two years.
DSI added in its statement to the Dubai bourse that when Goldman exercises its option on the warrants, its exposure will be settled in cash, subject to a pre-agreed settlement amount.
“We are excited to have completed this transaction with Goldman Sachs International and we look forward to working together in the future,” Osama Hamdan, the chief financial officer of DSI said in a statement.
“This is not a surprise. We feel Drake & Scull is a very good company which has been undervalued for quite a while and has, for a number of reasons, not performed as it should have done,” said Saleem Khokar, head of equities at the National Bank of Abu Dhabi.
“Clearly Goldman Sachs has done its homework and has also come to the conclusion that DSI is worth a lot more than its current value.”
“This is a vote of confidence not just in the company and in Dubai and its construction sector but also in the region,” he added. “Goldman has looked at the construction market in which DSI operates; Saudi Arabia, Qatar and the UAE and clearly thinks that this is a good place to invest.”
Last Wednesday, DSI signed a US$120m loan with a syndicate of banks including Emirates NBD Bank, First Gulf Bank, HSBC Bank Middle East and Mashreqbank, which Goldman Sachs coordinated and which the company said would help it to pursue its growth plans in North Africa and Asia.
The company has been expanding its operations outside the UAE over the past few years to combat the effects of the global economic downturn. Last week, it announced that it had been awarded three new contracts worth Dh318.5m to complete works on two schemes in Abu Dhabi and one in the city of Taif in Saudi Arabia.
On Sunday, the company announced a 93 per cent fall in profits for the three months to September compared with the same period a year earlier, which it blamed on rising costs and falling revenues. The net profits of Dh3.9m missed analysts’ forecasts and followed disappointing second-quarter results for the company when profits almost halved to Dh26.1m from Dh51.3m.