ADQ's Senaat submits offer to combine Emirates Steel with Arkan to create the UAE's largest steel and building materials company

Proposed transaction will unlock substantial value for shareholders in the long-term through a stronger balance sheet, increased scale, and increased resilience to market cycles

  

Abu Dhabi, UAE: General Holding Corporation PJSC (“Senaat”), part of ADQ and the sole shareholder of Emirates Steel Industries PJSC (“Emirates Steel”), announced today that it has submitted an offer to the Board of Arkan Building Materials Company PJSC (“Arkan”). The offer sets out the principal terms and conditions on which Senaat would transfer Emirates Steel, a leading integrated steel producer in the Middle East, to Arkan, a construction and building materials manufacturer in the UAE.

The combined group will compete alongside global industry leaders and will have a compelling strategic proposition, with strong potential for growth in the UAE and internationally. With enhanced corporate governance and attractive shareholder returns, the proposed transaction would make the combined group the largest listed entity of its kind in the UAE. Additionally, it would mark the first time that investors will have access to a steel producer on a UAE public market, which is expected to have a positive impact on overall demand and liquidity for the combined group’s shares.

With total assets of approximately AED 13 billion, the combined group would benefit from a sustainable balance sheet with a resilient long-term capital structure and a cash-generative business, and the transaction will be highly accretive to earnings per share. The combined group will be a best-in-class industry leader that is well invested and operates with state-of-the-art and environmentally conscious technologies, qualifying it for excellence and leadership in Environmental, Social, and Governance (ESG) credentials. It will be optimally positioned to benefit from the post-Covid recovery anticipated in the UAE and the regional construction sectors, which are expected to witness an acceleration in infrastructure projects as a result of various governmental stimulus programmes locally and regionally.

The combined group will also play a key role in delivering the UAE’s Industrial Strategy "Operation 300bn" through the production and distribution of market-leading products to ensure local industries are a driving force of a sustainable national economy.

Under key terms of the offer, in consideration for the transfer of Emirates Steel, Arkan would issue to Senaat a convertible instrument that would automatically convert into approximately 5.1 billion ordinary shares in the capital of Arkan upon closing of the transaction. The price at which the convertible instrument will convert into shares in Arkan is AED 0.798 per share. The offer implies an equity value of approximately AED 1.4 billion for Arkan. Post completion, Senaat would own approximately 87.5 percent of the entire issued share capital of the combined group.

Khalifa Sultan Al Suwaidi, Chairman of Senaat, commented:

“We believe the combination of Emirates Steel and Arkan presents an excellent opportunity for Arkan’s shareholders, offering increased scale, financial strength, resilience, and value via a best-in-class player with international ambitions. Emirates Steel has invested ahead of the market in upgrading and futureproofing its operations, introducing the latest innovative technologies into its manufacturing processes, and establishing a leading position in ESG. The proposed combination will create value for stakeholders in the UAE and beyond, offering an entry point for investors into one of the region’s most important sectors.”

If the Board of Arkan recommends the offer, and its shareholders subsequently approve it, then the transaction could close during the second half of 2021, subject to the receipt of all relevant governmental and regulatory approvals.

Rothschild & Co are acting as financial advisor and Allen & Overy LLP are acting as legal advisor to Senaat and its shareholder.

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