Arkan-Emirates Steel merger creates Dh13b steel, building materials giant

Arkan Building Materials Company (Arkan) confirmed on Wednesday that the completion of its merger process with Emirates Steel Industries, leading to the creation of the nation’s largest steel and building materials company.

The newly merged entity has total assets worth Dh13 billion.

The transaction, which was concluded following Arkan’s shareholder vote on August 9 and the receipt of all regulatory approvals, provides significant revenue diversification for the combined group. It also marks the first time that investors have access to a steel producer on a UAE public market, said a statement by the leading construction and building materials company.

The combination of Arkan and Emirates Steel, a leading construction and building materials company in the UAE, creates the UAE’s largest steel and building materials company with a compelling strategic proposition and strong potential for growth in the UAE and internationally, said the statement.

Abu Dhabi’s General Holding Corporation (Senaat), a subsidiary of sovereign wealth fund ADQ, has initiated the merger move. Senaat fully owns Emirates Steel and 51 per cent of Abu Dhabi-listed Arkan.

In May, Arkan said in a statement to Abu Dhabi Securities Exchange (ADX) that the key terms of Senaat’s offer are that Arkan would issue a convertible instrument to Senaat under the proposed merger deal that would automatically convert into approximately 5.1 billion ordinary shares in the capital of the company at Dh0.798 per share. The move valued Arkan at Dh1.4 billion.

As per the terms, Senaat owns approximately 87.5 per cent of the entire issued share capital of the combined group after the completion of the merger.

The Arkan statement said the merged group is well placed to scale and grow, create new business opportunities and ensure that homegrown manufacturers are at the forefront of driving a sustainable, diversified national economy.

According to a new study by law firm Baker McKenzie, the volume of mergers and acquisitions in the Middle East surged 59 per cent annually in the first half of 2021 as appetite for investment returned despite pandemic-related uncertainties.

The region recorded 307 M&A transactions in the first six months of the year, 48 per cent higher than the number of deals completed in the second half of 2020.The first-half value of deals dropped to $40.3 billion, a 7.0 per cent year-on-year decline. However, it was a significant improvement when compared to $13.2 billion worth of deals recorded in the second half of 2020.

— issacjohn@khalejtimes.com