Abu Dhabi’s ADQ offers to merge Abu Dhabi National Hotels with Adnec into $5.45bn entity

Abu Dhabi’s holding company ADQ submitted an offer to Abu Dhabi National Hotels Company to merge Abu Dhabi National Exhibitions Company (Adnec) with the hotel firm to create one of the largest hospitality, events and catering powerhouses in the region.

The combined group would have assets of approximately Dh20 billion ($5.45 billion). The merged entity would comprise 28 owned and operated hotels with a total of 6,700 rooms, three large exhibition centres in Abu Dhabi, Al Ain and London as well as several catering companies and food and beverage outlets.

“This proposed offer provides a unique opportunity to create value by bringing together two major players in Abu Dhabi’s hospitality and events sector,” Mansour AlMulla, chief investment officer of alternative investments and mergers & acquisitions at ADQ, said.

“The combined company would benefit from increased scale, new revenue opportunities, and an enhanced capital structure that will position it well for future growth.”

As part of the proposal ADNH would issue to ADQ a convertible instrument that would convert into 1.2 billion ordinary shares in the capital of ADNH at a price of 3.93 dirhams per share.

The offer implies an equity value of approximately Dh3.93bn for ADNH. After the transaction is completed, ADQ will own roughly 54.98 per cent of ADNH, according to the statement.

If ADNH's board recommends proceeding with the transaction, it will be subject to shareholder and regulatory approvals. If the approvals take place the transaction could close during the second half of 2021.

ADNH’s shares were trading at Dh4.1 per share when the stock market closed on Wednesday.

"The proposed merger would add scale to ADNH’s operations and give a strong foothold in the local markets,” Junaid Ansari, head of investment strategy & research at Kamco Invest, said. “The deal would be positive for the stock as seen from today’s return of 15 per cent as the sector has now passed the trough stage.”

The recent announcement of Abu Dhabi government's plan to invest $6bn in cultural sectors until 2025 would benefit the hospitality sector including ADNH, he added.

Set up in 2018, ADQ has a portfolio of conglomerates spanning key sectors of Abu Dhabi’s non-oil economy that include Abu Dhabi Power Corporation, Abu Dhabi Airports, Abu Dhabi Ports, Etihad Rail, Seha, insurer Daman, media companies Abu Dhabi Media and twofour54 and Abu Dhabi National Exhibitions Company, among others.

Abu Dhabi National Hotels, listed on Abu Dhabi Securities Exchange, owns a number of hotels in Dubai and Abu Dhabi including the Ritz Carlton Abu Dhabi Grand Canal, Sofitel Jumeirah Beach, Le Meridian Abu Dhabi and Address Dubai Mall, among others. It also manages Al Diar chain of hotels. The company reported a 154 per cent jump in its first quarter profit.

Adnec, which owns and operates the Abu Dhabi National Exhibition Centre, the largest exhibition venue in the Mena region has a domestic and international presence. The company’s portfolio includes the 100-acre ExCeL London exhibitions and conventions centre in the London Docklands, Al Ain Convention Centre, Aloft London ExCeL, Aloft Abu Dhabi, Andaz Capital Gate Abu Dhabi and Anantara Sir Bani Yas Island Abu Dhabi Resort among others.

Earlier this year, ADQ agreed to merge its healthcare entities Rafed and Union71 with Dubai-based Pure Health to create a major healthcare support services provider.

In March the company said it is planned to buy Egypt's Amoun Pharmaceutical Company from Canada's Bausch Health for $470m.