x Abu Dhabi, UAE Friday 21 July 2017

Hochtief deal kicks off Qatar cup preparations

Qatar Holding is paying almost US$530 million (Dh1.94 billion) for a 9.1 per cent stake in the German builder Hochtief.

Qatar Holding is paying almost US$530 million (Dh1.94 billion) for a 9.1 per cent stake in the German builder Hochtief as the emirate sets in motion its multibillion-dollar preparations to host the 2022 FIFA World Cup.

Qatar says Hochtief will play a major role in the country's construction-intensive preparations for the World Cup.

"This transaction cements our relationship with one of the key trading partners for the development of the infrastructure of Qatar ahead of the World Cup in 2022," said Ahmad Mohamed al Sayed, the managing director and chief executive of Qatar Holding. Hochtief issued shares directly to Qatar Holding at a price of €57.114 per share, close to the current stock value.

Analysts agree the real investment impetus will come from companies from outside the region, despite a stream of Gulf construction and contracting giants such as Emaar Properties and Arabtec voicing interest in tapping Qatar's good fortunes.

"This will be a catalyst to bring in the best in class to Qatar and I think there will be more announcements along these lines," said Shehzad Janab, the head of asset management at Daman Investments.

Qatar will tie up with foreign companies such as Hochteif for high-grade expertise and experience needed to tackle the country's World Cup ambitions, he said.

"Those to watch will be the foreign institutional investors, institutions are jumping on the bandwagon," Mr Janab said, adding that regional money into Qatar had rocketed.

"All of [the analysts] are overweight on Qatar and, although early euphoria was on the back of local retail money, when the dust settles further direction will come from elsewhere."

Qatar is the first Arab nation to host the world football event and has said it would spend as much as $50bn on infrastructure upgrades and $4bn to build nine stadiums and renovate three others.

"Rather than rely on solely regional companies such as Arabtec, it will be another arrow in the quiver to have a broad-based international expertise when considering infrastructure plans amount to over $50bn," said Julian Bruce, the director of equity sales at EFG Hermes.

Hochtief already has a presence in the country through five subsidiaries working on large-scale projects including an 8km street for commerce and enterprise businesses and a joint venture planning a major motorway.

Competition to set up office in Qatar will be high for a country that has a GDP of about $124bn, a significant figure given the size of the emirate.

"Clearly, there is not a money problem, so why would [Qatar] go for local companies when you can go foreign," said an economist from an international bank.

Large, foreign-owned banks established in Qatar are also obvious potential beneficiaries as they take on the bulk of financing for capital-intensive projects, said Elena Panayiotou, an analyst at Moody's rating agency.

"Corporate lending activities of all Qatari banks are expected to benefit from activities related to these large projects, including the funding of smaller projects, contracting and subcontracting. [But] larger banks, which have higher capital levels, are likely to benefit most as they will be able to participate in large financing deals," Ms Panayiotou said.

fhalime@thenational.ae