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By Megha Merani
Dubai-based contractor Drake & Scull International PJSC (DSI) this week held a press conference to formally announce one of the worst kept secrets in Dubai – that private equity firm Tabarak Investment had acquired the shares previously owned by its former chief executive Khaldoun Tabari and was now its biggest shareholder.
DSI CEO Wael Allan hailed the move as a “great milestone”, but the closer ties between the two firms puts the building contractor in prime position to snap up lucrative work on some of Tabarak’s pipeline of projects, acting as a major catalyst for the lose-making firm’s turnaround plans.
“Tabarak Investment is well known in the business and has great local and regional links, and with their commitment to the turnaround of DSI, I strongly believe that the company will basically get out of its current financial difficulties and actually move into a greater success story than it was before,” Allan said.
“We have let’s say a good structure to diversify (our) investment portfolio… so definitely there could be some synergy between Tabarak and Drake and Scull,” Ahmed Kilani, CEO of Tabarak Investment, told Thomson Reuters Projects on the sidelines of Sunday’s DSI press conference in Dubai.
“So in terms of captive business, there is some captive business that can be given to Drake and Scull. So maybe that kind of support Tabarak can provide to DSI,” he added.
Tabarak’s pipeline
Most of Tabarak’s investments are concentrated in the United Arab Emirates, according to the company’s website, and its current portfolio includes major equity stakes in different sectors such as real estate, education, healthcare, retail, manufacturing and trading.
One of the major assets where DSI could be in line to win work is Wahat Al Zaweya, a mixed-use community development spread over about 22 million square metres in the Faqaa corridor of Al Ain, along the Dubai-Al Ain highway.
The contract for construction of the main infrastructure work, worth around 2.2 billion UAE dirham ($599 million), has already been awarded to the Arabian Construction Company, but the major building work is still up for grabs.
“In terms of construction 20 percent of the infrastructure is already done,” Kilani said, adding that about 70 percent of the project is sold out.
“We’re going to start (issuing main construction tenders) maybe in the third quarter.”
The main construction tenders will be staggered based on project phases, Kilani added. “It’s a huge project… more than 10 billion dirhams.”
Turnaround plans
DSI, like many construction firms in the region, has been hit hard by the low oil prices and an economic slowdown in the sector, the company said in its consolidated financial results published in March.
In February it announced a turnaround and capital restructuring plan, which included a number of cost-cutting measures and capital raising initiatives, after reporting an annual loss 815.3 million UAE dirhams ($221.83 million) for 2016.
As part of this strategy, DSI announced to the Dubai Financial Market it had secured a binding offer from Tabarak Investment for a capital injection of 500 million UAE dirhams.
Kilani added that the “strategic synergies” between DSI and Tabarak would be “pivotal to the success” of DSI’s turnaround strategy.
“We are optimistic about the prospects of the company in the long term and we are keen on the completion of the capital restructuring program to assist the company during this challenging time, yet promising outlook,” Kilani added.
DSI said on Sunday it expects to complete a plan to reduce its capital by 75 percent by the end of the third quarter.
© Zawya 2017
