Al Habtoor IPO deferred on lack of opportunities

Al Habtoor Group postponed an initial share sale because it did not see sufficient opportunities to invest the proceeds and may now consider an public offering in 2014.

Khalaf Ahmad Al Habtoor, the chairman of Al Habtoor Group, said he will focus instead on best practice and growing the company in a sustainable way rather than going public at the moment. Satish KumarShow more

Al Habtoor Group postponed an initial share sale because it did not see sufficient opportunities to invest the proceeds and may now consider a public offering in 2014.

"We thought we will take that money and go to the markets and buy what we want," the chairman Khalaf Ahmad Al Habtoor said. "We looked at safe markets, like Germany and Britain and we found that in the areas we know, there is nothing but recession. We didn't find an opportunity that would give us good return to give shareholders."

The company will rely on cash from operations to fund projects, including a new skyscraper with more than 800 luxury apartments on a canal in Dubai, he said. Construction of the tower will start late next year or in early 2014 and is set to be under construction for two years. He said a decision had not been made on whether the 800 homes would be rented or sold.

The company is already building a US$1.3 billion (Dh4.77bn) hotel complex in Dubai. Grant Thornton, the accounting firm, valued Al Habtoor Group, which includes hospitality, property and automotive divisions, at $6.06bn.

Mr Al Habtoor said he searched markets in eastern and western Europe as well as Asia for hotels, property and other assets and said he was not convinced of their earnings potential. He said the initial public offering (IPO) plan was motivated by his desire to ensure the continuity of his company and not by a need for cash.

"I don't need to take peoples' money and put it in the bank," Mr Al Habtoor said. "They can do that themselves."

Trading volumes in Dubai are near a six-year low and global banks have been cutting staff to reduce costs. Al Habtoor Group, which has been weighing an IPO for about 20 years, said it would delay the share sale last week.

At the time of the announcement of the delay, Mr Al Habtoor had said: "After a thorough evaluation I have decided to postpone the IPO. It is a moral issue not taking the group public at this time. I will continue to focus on best practice and growing the company in a sustainable way."

Mr Al Habtoor said he was investing about $1.6bn on various projects. He was also considering plans for a five-star hotel in Minsk, Belarus. The group owns six hotels and has four more in various stages of construction, including the Waldorf Astoria on The Palm Jumeirah.

"We will finance from our cash flows and according to the company's cash flow strength," Mr Al Habtoor said.

He added that cash from operations at the group may surge by 50 per cent to 60 per cent by the end of 2016 as most of the hotels under construction become operational and other projects reach fruition. Profit next year might climb 10 per cent across the group, he said, without providing details.

Mr Al Habtoor said Al Habtoor Leighton Group, the construction joint venture with Australia's biggest building firm in which he is the minority shareholder, expects its order backlog to be at least Dh40bn next year.

The joint venture is seeing increased demand for building across the Middle East, Mr Al Habtoor said.

"They have started seeing an increase in the number of contracts," he said. "They have some in Qatar, Abu Dhabi, Dubai, Saudi Arabia and Iraq."

Leighton Group, which is building the Paris Sorbonne University campus in Abu Dhabi, is also building a $1.3bn hotel complex owned by Mr Al Habtoor.

"We are not prepared to make a forecast at this time," said Justin Grogan, a Leighton Group spokesman, about the joint venture's prospects for next year. The company might include a 2013 forecast in its full-year results to be released in February, he added. Al Habtoor and Leighton Group started their joint venture in 2007.

* Bloomberg News