Drake & Scull Planning Saudi Arabia Deal After Loan
(Corrects warrant details in first, second paragraph.)
Drake & Scull International PJSC, (DSI) the Dubai-based company which raised $120 million in a loan coordinated by Goldman Sachs Group Inc. in November, plans an acquisition in Saudi Arabia and expansion in India and North Africa to help diversify revenue.
Drake & Scull will use proceeds from the loan for a possible $25 million buyout in Saudi Arabia, Chief Executive Officer Khaldoun Tabari said in an interview today. The company’s Saudi venture won a 2.7 billion-riyal ($720 million) contract in December to build four hotel towers in Mecca and the acquisition “will help us in what we are doing right now with the contract wins,” he said.
Goldman Sachs in November bought equity warrants representing about 8.5 percent of the market value of Drake & Scull, whose shareholders include HSBC Private Bank. The company said the same month it obtained a $120 million loan, coordinated by Goldman Sachs, to help it expand into other markets.
Drake & Scull, a supplier of engineering services to the construction industry, sought contracts in Saudi Arabia, India and Romania after Dubai’s construction market was pummeled by a property crash. Saudi Arabia, the biggest Arab economy, is spending about $130 billion to add jobs and stimulate its economy that expanded an estimated 5.6 percent last year.
“We are looking at North Africa with Algeria and we are looking at India as the markets for growth” this year, Tabari said. “We are now gathering momentum in Saudi Arabia, we are gathering momentum in Qatar.”
Drake & Scull may report a 56 percent drop in fourth- quarter profit to 17 million dirhams ($4.6 million), according to the median estimate of three analysts compiled by Bloomberg. The company reported a 93 percent decline in third-quarter profit.
“Things are looking better for the fourth quarter, and I think the numbers will be better than the third quarter that’s for sure,” Tabari said in the interview in the United Arab Emirates’ sheikhdom of Sharjah. “Some of the projects that we had, kicked in in the fourth quarter.”
Drake & Scull expects “huge growth” in contract order backlog in the first quarter and expects to win one contract in Qatar and two in Saudi Arabia this year, Tabari said. Profit in 2013 will rise by 20 percent to 25 percent over 2012, he said.
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