MANAMA - International Investment Bank ("IIB"), a globally focused investment bank based in Bahrain, today announced the acquisition of 35% stake in USD $30 million Bahrain Based steel reinforcement bar manufacturer, Universal Rolling WLL ("UNIROL"). Exit from the investment is intended to be within five years and an internal rate of return of more than 23% is targeted by IIB.
Steel reinforcement bars ("rebars") are an important component in construction projects and generally represent around 15% of total construction costs. UNIROL is constructing an industrial facility which will be the first steel rolling mill in Bahrain. Its plant and proposed operation has been endorsed by international consultants from the U.K., Germany, and the U.S. It will be using the German Thermo Mechanical Treatment Technology ("TMT"). This will enable UNIROL to manufacture and market a superior rebar product than currently available in the Bahraini market. UNIROL will also have first mover advantage, creating the opportunity to capture a significant share of the rebar market. Demand for rebars in Bahrain is around 220,000 MT every year, which is currently satisfied purely by imports.
UNIROL's enhanced rebar product will be marketed into Bahrain's growing real estate sector, where increasing demand has resulted in significant construction activity across the commercial and residential sectors. With Bahrain's commercial rents being 45% cheaper than Dubai or Doha, regional companies are increasingly likely to locate their operations in Bahrain, driving demand for office space over the coming years. Population growth and the increasing numbers of tourists visiting Bahrain will also drive demand for residential and commercial properties.
The investment by UNIROL to create a local source of steel will also enable Bahraini steel traders to lower their costs considerably through reduced transportation, freight, and import duty costs, as well as minimizing the need for warehousing and maintaining their own small inventories, as traders will be able to deliver direct to clients. This move has been welcomed by most of the current steel traders in the Kingdom.
Although the target market for UNIROL is Bahrain, its rebars will have duty free access to other GCC countries. UNIROL will also offer its enhanced rebar products to wholesalers and has already received firm proposals of business from the wholesale market.
The new acquisition follows IIB's previous success in delivering out performance and value for investors and shareholders across a range of sectors. The success of IIB's strategy has seen it increase its full year net profit for the year to 31 December 2006 by 92% to US$13.5 million. Underscoring their confidence in IIB's strategy, shareholders gave approval at last week's AGM for IIB to more than double its issued and paid up capital from US$43 million to US$100m, taking shareholder funds from US$61.4 million to US$170 million.
Commenting on the announcement, Mr. Aabed Al Zeera, Chief Executive Officer of IIB, said, "We are delighted to be able to offer another compelling investment opportunity to our investors. The rebar market in Bahrain will benefit directly from the significant growth in construction that is being generated by demand for both commercial and residential property. UNIROL's investment in a new technology will enable it to offer a superior product in the market place, and will have first-mover advantage being the first rebar manufacturing facility in Bahrain."
Mr Ali Al Mahroos, Chairman of UNIROL further added, "Along with a business's consideration of local demand, it is also our firm belief that a business should consider the maximum added value it contributes to the countries economy. UNIROL will create 150 to 200 direct jobs and 500 indirect jobs through the business it will create in the market. It is always beneficial to strive to reduce Bahrain's dependency on foreign imports as much as possible in every field. With our team of internationally experienced professional management that is being put in place, and by providing high quality steel which conforms to both British and American standards, and with the service, convenience and production flexibility expected to be created by UNIROL, we feel that the company will add great value and business to the economy."
"We look forward to working with IIB as partners. IIB executives and shareholders shared our belief in the real estate sector growth in Bahrain in the coming years and believe in the ability of UNIROL to emerge as an important manufacturing plant in the country. The new capital increase achieved by the deal will be utilized to increase our initial output from 100,000 tons per annum to 170,000 tons per annum to fulfill the demand of the Kingdom," added Mr. Al Mahroos.
"IIB continues to seek out new and innovative ways to deliver real value for our clients through the sourcing and development of high quality Shari'ah-compliant products. We have had much success to date in offering numerous opportunities across diverse asset classes, industry sectors and territories and we believe our latest investment in the Bahraini rebar manufacturing market reflects the quality, strength and diversity of the investment avenues we open up to our investors. Our investment in UNIROL meets our clients' demands for investing in tangible assets with strong growth potential," said IIB's Chief Operating Officer, Mr. Salah Nooruddin.
"UNIROL demonstrates how through our strong global network of contacts, IIB continues to gain access to high quality investments, which are capable of providing superior risk adjusted returns to our investors. Selecting the right deals and working with the right partners to maximize value is critical to the ongoing success of IIB and to the enhanced value we continue to provide to our GCC based investors and shareholders on an ongoing basis, our pipeline for 2007 includes additional new attractive investment opportunities in income generating and development real estate and private equity in GCC and Europe. Soon, we will be bringing to market these rewarding opportunities, Insha Allah. Our aim is to offer rewarding opportunities as well as helping our investors and shareholders diversify their risk across sector, region, and asset class," concluded Mohamed Hadi Mejai, Director of Investment and Business Development.
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About International Investment Bank
International Investment Bank B.S.C. (IIB) was incorporated in Bahrain in October 2003 as an Islamic investment bank, with an authorised capital of US$200 million and a paid up capital of US$43 million. The Bank's shareholders are high net worth individuals, business houses and institutions from the GCC states. IIB undertakes three core business activities: private equity, real estate and asset management and aims to offer its clients an internationally diversified range of investments generated through its network of strategic partnerships.
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© Press Release 2007
