Dubai Tycoon Makes $599 Million Offer to Take Damac Private

(Bloomberg) -- Dubai-based billionaire Hussain Sajwani offered to take over the rest of Damac Properties PJSC at a discount of nearly 45% to the developer’s local listing in 2015, the latest bid to buy out minority shareholders in the United Arab Emirates over the past year.

Maple Invest Co Limited, an investment vehicle owned by Sajwani, offered 2.2 billion dirhams ($599 million), making what it called “a voluntary conditional offer for the issued share capital of Damac not already owned by Maple and its affiliates,” according to separate statements on Wednesday. Sajwani, who owns a 72% stake in the developer, resigned as Damac’s chairman to avoid conflict of interest.

Damac traded below the 1.3 dirhams per share offer price on Wednesday. The stock dropped as much as 6.2% before paring its drop to 1.5% at the close, valuing the entire company at 7.74 billion dirhams.

Sluggish trading, a slump in prices and liquidity, and a desire to escape investor scrutiny have been driving efforts to take public companies private in Dubai. Emaar Properties PJSC said in March it will effectively delist one of its units for about two-thirds of its original public-offering price. Late last year, government-controlled Meraas Holding LLC proposed taking DXB Entertainments private at a 33% discount.

The proposed price is equal to the stock’s closing level of Tuesday. It’s 31% lower than the average price for the shares over the past five years.

“The suggested premium appears very low given recent developments in the Dubai real estate market and the improved outlook for both demand and prices,” said Tarek Fadlallah, the Dubai-based chief executive officer of the Middle East unit of Nomura Asset Management.

Dubai’s property market has been improving and the pace of residential property price declines has been slowing this year. Dubai’s largest developer Emaar Properties said sales in the first five months of this year more than tripled from 2020 to 10.5 billion dirhams.

Damac listed in Dubai’s main bourse in 2015 in an exchange for shares that were traded in London since 2013. The company raised about $379 million with its U.K. IPO.

Its stock is down about 1.5% for the year, lagging a 14% increase for the DFM General Index and a 13% increase for a gauge tracking listed real estate companies.

Emaar Malls’s de-listing plans paved the way for Damac and the stock market will be left with less depth as a result, according to Mohammed Ali Yasin, chief strategy officer at Al Dhabi Capital Ltd.

The trend may have repercussions for a market that’s struggling to sustain interest and risks depriving investors of exposure to one of the emirate’s crucial sectors.

Damac has reported losses in 2020 and 2019 as the property market struggled with an oversupply that hammered prices for the past seven years. The construction industry will deliver an estimated 62,000 homes in Dubai this year and nearly 63,500 in 2022, which would be the most since 2009, according to consultancy firm Knight Frank LLP.

“The premium that used to be there for public companies in the real estate industry is no longer there,” he said. “Real estate firms are lagging and managements are under pressure at a time recovery has some time to go.”

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