Drake & Scull close to deal

Drake and Scull, a Dubai-based mechanical, engineering and plumbing (MEP) firm, is close to finalising a deal to acquire a Saudi Arabian construction company. The firm will buy more than half the Saudi civil works contractor, said Khaldoun Tabari, the chief executive of Drake & Scull yesterday on the sidelines of a conference organised by the events presenter IQPC. Mr Tabari confirmed that the company also was in talks with at least four UAE firms about mergers or acquisitions. The move comes ahead of a public listing of Drake and Scull scheduled for the end of this month. The company will be the first MEP firm in the UAE to list publicly. "We believe the market is ripe for consolidation," said Mr Tabari. "Money has dried up and private companies have no way to borrow. So it makes sense for them to tie-up with companies who are well capitalised." Mr Tabari added that the acquisition of the Saudi firm, which he declined to name, was part of the company's plan to invest in construction companies which complement its business. The acquisition would focus on civil works jobs in Saudi Arabia. "It gives us more control over our supply chain," he said. Mr Tabari said that Drake and Scull has US$300 million (Dh1.1 billion) in available capital. Economic uncertainty is expected to prompt mergers and acquisitions among construction firms, as well as lead to closer partnership deals between contractors and property developers to ensure speedy delivery of the projects that have already been sold. Arabtec Holding, the largest construction company in the country, is in talks with developers about forming partnerships that would see it join a series of projects. The contractor already has close partnerships with Nakheel and Emaar Properties. "We're planning our future growth. We've been having individual conversations with developers about partnering. Our strategy at the moment is survival," said Riad Kamal, the chairman of Arabtec. Well-capitalised contractors are also likely to seek acquisitions in construction supply companies to ensure they are well equipped to execute projects from now on. "Contractors will need to be looking more closely at relationships with all companies in the supply chain and will need to work strategically, not just for one project but for overall project delivery," said Andrew Greaves, a partner at Trowers and Hamlins, a law firm. According to John Bullough, the recently appointed chief executive of Aldar Properties, based in Abu Dhabi, the global economic slowdown will benefit the sector as contractors and developers find ways of sharing risk. "In the past few years it has been very difficult to procure contractor resources," he said. "But now there'll be more drive towards sharing risk, driving costs down and partnering - this is a good thing." agiuffrida@thenational.ae