DUBAI // Shuaa Capital is set to reap US$50 million (Dh183.65m) from the sale of one of its biggest investments in Kuwait as part of a turnaround strategy designed to reduce the size of its portfolio. The investment bank will sell a 49 per cent stake in Al Kout Industrial Projects (AIP), a chemical business, to "a group of prominent Kuwaiti investors". Shuaa bought the stake in 2006.
AIP specialises in producing chlorine, hydrochloric acid, caustic soda and other related chemicals for applications ranging from water treatment and food manufacture to oil drilling. The sale is part of Shuaa's pledge to turn around its business by focusing on fee generating activities such as asset management and investment banking while selling other investments. Last year the bank was forced to take Dh312m in impairment charges related to its portfolio.
"Earlier this year, when we launched our turnaround plan, we made it clear that we wanted to focus the company on our successful fee generating businesses," said Sameer al Ansari, the bank's chief executive. "Our heritage principal investments, including our stake in Al Kout, fall outside of our new strategy. We continue to look to sell other non-core assets and are very encouraged by the fact that market sentiment has improved and deals are being done at sensible valuations."
Shuaa returned to profit in the first three months of the year after four quarters of losses. The bank posted a net profit of Dh19.5m for the quarter ending on March 31. Shuaa has suffered a series of setbacks in the past 18 months, however. It paid a $1m fine levied by the Dubai Financial Services Authority over trading infractions. The company was also drawn into a long wrangle over convertible bonds that resulted in Dubai Group becoming Shuaa's largest shareholder.
Dubai Group is the financial arm of Dubai Holding, which is the investment vehicle of Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai. "We have an optimistic outlook going into the second quarter," David Deards, the chief financial officer, said this month. Dubai Holding has hired financial consultants to review the finances of two of its largest units. That follows moves by Dubai World, another of the emirate's three major government-owned conglomerates, to seek fresh terms on $24.8 billion of its debt last year.
Analysts have welcomed Shuaa's return to the black but warned that more corporate activity was needed for the profits to continue. The bank has said it has mandates for three initial public offerings (IPO) of stock, several mergers and other buy and sell plans. This month, Mr al Ansari said the bank was still on target to lead the country's first IPO this year. He said he would make an announcement in the next couple of weeks.
"Many companies across the UAE are looking at IPOs," Mr al Ansari said at the time. uharnischfeger@thenational.ae