ABU DHABI: The United Arab Emirates is merging its two flagship state aluminium firms to create the world’s fifth largest aluminium company with an enterprise value of $15bn.
The merger will improve efficiency and help the emirate’s aluminium industry better compete with rivals in the region. UAE has been planning the move for three years.
The new entity, Emirates Global Aluminium, will be jointly held by Investment Corporation of Dubai (ICD) and Abu Dhabi state sovereign fund Mubadala.
“Emirates Global Aluminium will build on strong foundations of leadership, to become a major industrial champion and engine of economic development for our people,” Khaldoon Khalifa Al Mubarak, chief executive of Mubadala, and the Chairman of the new entity said in the statement.
In 2011, the Chairman of Dubai aluminium producer Dubal, Sheikh Hamdan bin Rashid Al Maktoum, was quoted by a local newspaper as saying that Mubadala had offered to buy a stake in Dubal, without providing more details.
The merged entity will have aluminium production capacity of 2.4 million tonnes per year after the completion of Emal’s phase two operations in mid-2014, the statement said.
Emal is on track to complete its $4bn phase two by the end of 2014, when its capacity will rise to 1.3 million tonnes from the current 800,000 tonnes a year. Dubal operates the largest single-site smelting facility in the world, built on a 480-hectare site in Jebel Ali, which has the capacity to produce more than one million metric tonnes of high quality finished aluminium products per year.
Abdulla Kalban, president and chief executive of Dubal, will be the managing director and chief executive of the new firm.
ICD owns stakes in some of Dubai’s largest firms, such as Emirates Airline and lender Emirates NBD, while Mubadala has a mandate to develop Abu Dhabi’s local economy and has assets of $55bn.
The global financial crisis dealt a blow to Dubai’s breakneck economic expansion and the free-wheeling city state found its fortunes more closely entwined with those of its oil-rich neighbour in 2009, when Abu Dhabi stepped in with a $10bn bailout that allowed Dubai to avoid a debt crisis.
“This deal could be giving hints of more consolidation at the government level and creating strong UAE players on the global stage,” said Mohamed Ali Yasin, Managing Director of National Bank of Abu Dhabi’s brokerage division.
“It also in a way shapes the policy ... for the next direction of economic growth of the UAE,” he said.
Governments across the Gulf Arab region are trying to reduce their dependence on oil by diversifying into sectors such as aluminium and petrochemicals.
Dubai’s shift has been the most radical, its dash into new industries born of necessity as its oil and gas reserves decline. Abu Dhabi, with far greater reserves of hydrocarbons, has taken a more gradual approach.
Abu Dhabi’s abundant energy reserves will help the combined company keep a lid on the high energy costs involved in aluminium smelting.
The deal has been in the works for years.
“There are going to be lot of surprises in the next two years and this is the first one,” said a senior Abu Dhabi government official, hinting at further consolidation of state companies.
The two emirates have also been in talks to merge their two main stock exchanges and had hired Goldman Sachs Inc to advise on the proposed transaction in 2010.
ICD owns stakes in some of Dubai’s largest firms, such as Emirates Airline and lender Emirates NBD, while Mubadala has a mandate to develop Abu Dhabi’s local economy and has assets of $55bn.
Agencies
