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Drake & Scull Will Announce Second Saudi Acquisition

Nov. 9 (Bloomberg) -- Drake & Scull International PJSC, a Dubai-based engineering contractor for the real-estate industry, will announce a second acquisition in Saudi Arabia in a week, the company’s chief executive officer said.

The company said yesterday it bought a 65 percent stake in Saudi Arabian mechanical, electrical and plumbing company Drake & Scull International Saudi WLL for 243 million riyals ($64.8 million), which has a backlog of 815 million riyals in orders. The acquisitions will be funded with 50 percent cash and 50 percent loans, Khaldoun Tabari said.

Drake & Scull had an order backlog of 4.9 billion dirhams ($1.33 billion) at the end of the third quarter, and hopes to “have substantially more” by the end of the year, Tabari told reporters in Dubai today.

The company reported a 44 percent drop in third-quarter profit yesterday as costs rose to 13.8 million dirhams compared with 2.33 million dirhams a year earlier. Contract costs increased to 3.76 billion dirhams from 3.1 billion dirhams.

The deepest global financial crisis since the 1930s led Dubai property prices to drop by more than 50 percent from their 2008 peak and forced builders to cancel half of the projects in the emirate.

Home prices declined 6 percent in the third quarter amid increasing supply and lower demand, property broker Colliers International said in a report earlier this week.

The third quarter was hit “by the delay in the progress of the work, revenue is holding up and pre-construction cost is hitting us,” Tabari said today. The United Arab Emirates “could possibly see a further decline” in property prices if the liquidity situation does not improve.

Drake & Scull still has 500 million dirhams in case and hopes to enter India next year, although companies in India are expensive, Tabari said. Tapping the bond market is an “interesting possibility” if the company makes a “substantial acquisition,” he said.

To contact the reporters on this story: Arif Sharif in Dubai at asharif2@bloomberg.net Ayesha Daya in Dubai at adaya1@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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