Al Habtoor Says IPO Delayed on Scarce Investment Prospect

Al Habtoor Group LLC, controlled by billionaire Khalaf Al Habtoor, postponed an initial share sale because it didn’t see sufficient opportunities to invest the proceeds and may consider reviving the plan in 2014.

“We didn’t find an opportunity that would give us good return to give shareholders,” Al Habtoor said in a Dec. 23 interview at his office in Dubai. “We looked at safe markets, like Germany and Britain and we found that in the areas we know, there is nothing but recession.”

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 in late 2013 or early 2014 and is set to be completed two years later. He said a decision hasn’t been made on whether the 800 homes would be rented or sold.

The company is already building a $1.3 billion hotel complex in Dubai. Grant Thornton, the accounting firm, valued Al Habtoor Group, which includes hospitality, real estate and automotive divisions, at 22 billion dirhams ($6 billion).

Looking for Hotels

The billionaire said he searched markets in eastern and western Europe as well as Asia for hotels, real estate and other assets and he wasn’t convinced of their earnings potential. He said the 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,” 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, which has been weighing an IPO for about 20 years, said it would delay the share sale on Dec. 18. Economic and political upheaval in the middle East and Europe have also slowed regional share sales in the past two years.

Al Habtoor said he’s investing about $1.6 billion on various projects. He’s also considering plans to build a five-star hotel in Minsk, Belarus. Al Habtoor owns six hotels and has four more in various stages of construction including the Waldorf Astoria on an artificial island off Dubai’s coast.

“We will finance from our cash flows and according to the company’s cash flow strength,” Al Habtoor said.

’Paper in Drawer’

U.A.E. banks have no appetite to lend currently and “we don’t want them to embarrass us or have us embarrass them,” he said. The group will have “surplus” cash flows until 2015 when it may seek bank loans, he said.

Al Habtoor said he doesn’t plan to get a credit rating for debt instruments. “I don’t believe in bonds to begin with,” he said. “It’s a paper I can put in a drawer. I don’t like the whole thing especially going and begging investors for money. I don’t think we will need that. Not today and not tomorrow.”

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

Al Habtoor’s 29-year-old auto division is the country’s sole distributor for Mitsubishi, Bentley and Bugatti. He has 13 showrooms throughout the U.A.E. and a leasing division with 8,000 rental cars. He built the world’s largest repair facility for Bentley and Bugatti, he said.

In addition, the group owns and runs two international private schools and has a 27.5 percent stake in contractor Habtoor Leighton Group, a joint venture formed in 2007 between Habtoor Engineering and Australia’s Leighton Holdings Ltd.

Al Habtoor, which published its earnings on Dec. 18 for the first time, said it forecast a 16 percent profit increase this year to 700 million dirhams compared with 2011.

Grant Thornton’s evaluation of the business excluded two hotels, a shopping mall and a theme park in Lebanon as well as Le Meridien Budapest in Hungary, Al Habtoor said Dec. 18. It also left out the value of its holding in Habtoor Leighton Group and several stakes in some other companies.

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