Drake & Scull buys 82pc of German firm
Dubai, November 18, 2009
Dubai's Drake and Scull International bought an 82 per cent stake in a German waste treatment firm and said it expected at least one more acquisition for up to $20 million by the year-end.
Drake paid Dh145 million ($39 million) for control of Passavant-Roediger which specialises in wastewater, water and sludge treatment technologies, in what was its first acquisition.
Drake - which specialises in mechanical, engineering and plumbing businesses and listed on the Dubai Financial Market in March - has been expanding outside its home market as it looks to diversify its portfolio and weather the financial downturn.
'I would say at least one (more acquisition) by the end of the year in Kuwait or Qatar, close to Dh70-75 million,' chief executive Khaldoun Tabari told Reuters, adding the target would be a mechanical, engineering and plumbing company in Kuwait or Qatar.
Outside the Gulf, Drake won its first contract in Thailand in September and also operates in Sudan, and is looking to win its first contract in Libya, where it has an office.
'In Libya we are bidding for six or seven projects. Libya has its own pace. Hopefully we'll have something there sooner rather than later,' Tabari said.
'Less than 30 per cent of homes in the Mena region are connected to water and sewage compared to Europe and the US which is 90 per cent, perhaps up to 97 per cent. This gap needs to be addressed,' Tabari told reporters.
The Passavant-Roediger acquisition would be financed 50 per cent through its own cash and 50 per cent through loans by three or four local banks, he said, declining to say which.
Passavant-Roediger operates in 13 countries in Europe, the Middle East, north Africa and Asia and has a project backlog of Dh450 million.
'The most important acquisitions are the ones that will come in the coming months or so and will bring additional market penetration in the Gulf,' said Roy Cherry, vice president research, real estate and construction at Shuaa Capital.
'This acquisition is more about acquiring know-how,' Cherry said.
Tabari told Reuters he expected revenues for 2009 to reach Dh1.8-2 billion, adding the firm's project backlog globally was currently around Dh3 billion.
In August, Drake said it was bidding for contracts worth about Dh700 million in the Gulf and said the first of three planned acquisitions in the region would happen by the end of September.
Drake made a net profit of Dh71 million in the third quarter. The firm's shares closed unchanged at 1 dirham on Wednesday.-Reuters