Monday, Dec 11, 2006
By Simeon Kerr
OF DOW JONES NEWSWIRES
DUBAI (Zawya Dow Jones)--European investment bank Rothschild plans to open its first group office in the Middle East this week to boost its global presence and advise regional investors on cross-border mergers and acquisitions.
In an interview, Lionel Zinsou, Rothschild's general partner and head of Middle East and Africa operations, and Dubai-based manager Michael Helou said that the privately owned investment bank hopes the new office, in Dubai, will help the company bridge the geographical gap between the firm's European and Asian operations.
"It is very hard to remain credible bankers in Asia or Europe if you aren't here in the Middle East," Zinsou said.
Rothschild says it hopes the firm's expertise and international network will help it seal deals in the region, but its long-term goal is to become a player in Mideast banking in its own right.
Rothschild's entry into Dubai comes relatively late. Major banks such as Morgan Stanley, Credit Suisse, HSBC, Merrill Lynch, J.P. Morgan Chase and Goldman Sachs are already operating, or on the verge of opening, in Dubai's tax-free financial district.
Even so, Rothschild is starting to land business. One Indian firm, for example, has asked the bank to find it a strategic investor willing to pour cash into the company in exchange for an equity stake. Given the rising interest from the Persian Gulf in Indian and other Asian markets, Rothschild needs to be on the ground here, Zinsou says.
Rothschild is also working on two mandates for mergers and acquisition and debt financing. One is for a company in telecommunications and the other is from a financial institution, Zinsou adds.
The bank says its expertise in advising on M&As and debt finance comes at an ideal time for the region, where years of sky-high oil prices have fueled a spending spree from the government and from private investment houses, as well as a thriving regional private-equity industry.
Government-owned investment firms are seeking to snap up firms in a bid to diversify assets derived from oil income, or in the case of Dubai, the emirate's successful real-estate market.
The region's well-capitalized telecoms firms - such as Mobile Telecommunications Co. of Kuwait and the U.A.E.'s Etisalat - are highly acquisitive, expanding into Africa, Asia and Europe on the hunt for new investments after having made several regional purchases. Helou adds that energy should prove to be another sector for the bank to focus its advisory services.
The investment bank advised European clients on the sale of Peninsular & Oriental Steam Navigation Co. to DP World, as well as SR Technic's acquisition by a Dubai-Abu Dhabi government consortium. Rothschild also advised Egypt-based Orascom Telecom on its entrance into the European telecom market through the purchase of Italian telecom Wind.
The region's banks are also looking abroad for new investment opportunities. Rothschild says it can help advise these large regional institutions on acquisitions abroad, with a round of domestic consolidation among local banks also likely.
Privatization is another area in which the bank - famous for aiding the U.K. government's privatization drive in the 1980s - hopes to win business.
Zinsou says the process may take time, given the social ramifications of government selloffs, but Rothschild says it is investing in the region long-term and can afford to be patient.
Latecomer eyes fast expansion
Zinsou says the bank thought of moving to Dubai five years ago, but at that point Rothschild's Asian operations weren't deep enough to warrant the move.
"Before Europe could see the value of Dubai operations, now the entire group, especially Asia, are very keen for us to be on the ground here," said Zinsou.
The Mideast operations will form a crucial bridge between Europe and Asia.
Zinsou says the bank wants the Asian part of its business, which currently accounts for 10%, to rise to around a third.
"The world is revolving - and the center of gravity has changed," he said.
Rothschild aims to open other offices in the region, with an initial eye on Abu Dhabi, the oil-rich capital of the U.A.E., and neighboring gas-rich Qatar, which has its own financial center.
"The U.A.E., Qatar and Saudi Arabia are the key markets," said Helou.
The bank's exclusive partnership on equities capital markets advisory with ABN AMRO will open up the pipeline further, with the Dutch bank's reported intention to quit a 40% stake in Saudi Hollandi Bank providing further impetus for Rothschild to consider Saudi options, such as operating under a Saudi Capital Markets Authority license.
"Saudi is the biggest market in the Gulf, so its clearly an issue to be looked at," said Helou, adding that the firm will also seek to boost its Islamic finance capabilities to tap into growing regional demand for products that comply with Islamic law, or Shariah.
Rothschild, owned by a German family, is a private firm and as such says it believes its discreet nature will appeal to regional clients, where family-owned money rules.
"We are very discreet, which could be more relevant to this region than others," said Zinsou.
-By Simeon Kerr, Dow Jones Newswires, +971 4 228 5225, simeon.kerr@dowjones.com
Copyright (c) 2006 Dow Jones & Company, Inc.
(END) Dow Jones Newswires
11-12-06 0839GMT
