Al Ramz plans reverse takeover with DDC deal
DUBAI, November 20, 2015
Al Ramz Capital, a brokerage house in the UAE, is planning a reverse takeover with its acquisition of 82.4 per cent of Dubai Development Company (DDC), three sources familiar with the matter told Reuters on Thursday.
The transaction, which market analysts say is the first of its kind in the UAE, could encourage more companies looking to go public to follow suit.
A reverse takeover is when a private company becomes a publicly listed company after acquiring a controlling stake in a public company. It allows companies to become listed without having to go through an initial public offering (IPO).
Stockbroker Al Ramz plans to amend the business activities, objectives and strategy of DDC, the sources said, declining to be named because the information has not been made public.
The company declined to comment when contacted by Reuters on Thursday and Dubai Development Company could not be reached for immediate comment.
Al Ramz's managing director Mohammad Al Mortada Al Dandashi told UAE newspaper The National last year that it planned to convert to a fully fledged investment bank through an IPO.
However, UAE companies have shied away from IPOs this year amid declining stock valuations as lower oil prices weigh on market sentiment.
Dubai's main equity benchmark has declined 28.29 per cent in the past 12 months, while the Abu Dhabi Securities Exchange General Index has fallen by 13.89 per cent in the same period.
Al Ramz, acting on behalf of a group of investors, bought DDC on November 2 at Dh4.55 ($81.6) a share, according to a statement distributed by the Dubai stock exchange on November 17.
The deal is valued at Dh37.5 million ($10.21 million), according to Reuters calculations.
DDC, an illiquid stock that last traded on the Dubai Financial Market at Dh2.40 in February 2014, reported a third-quarter net loss of Dh57,362, narrowing from a Dh186,475 loss a year earlier.
"It's an interesting transaction," said Mohammed Ali Yasin, the managing director at National Bank of Abu Dhabi's brokerage arm, adding that the move opens a new route for private companies to target non-traded public companies to be used as a shell to bypass the valuation risk that comes with a public share sale.
DDC is among a handful of companies that have hardly traded since listing on the Dubai bourse. Many of these companies have a limited shareholder base that tend to hold on to their shares. - Reuters
