ADQ, one of the three sovereign wealth funds of the Abu Dhabi government, is planning to merge Emirates Steel Industries with Arkan Building Materials to create the largest entity for steel and building materials production in the United Arab Emirates, with total assets estimated at around 13 billion dirhams (1 dollar equals 3.67 dirhams).
Arkan's shares rose by 12.78% during the Abu Dhabi Securities Exchange trading on Sunday, reaching a price of 900 fils per share. The Abu Dhabi government is working on merging some companies as part of its efforts to support the economy and diversify away from hydrocarbon production. Since its establishment in 2018, the ADQ fund has rapidly grown to join the ranks of the top 20 sovereign wealth funds globally, currently being the third-largest fund in Abu Dhabi after the Abu Dhabi Investment Authority and Mubadala Investment Company.
The sovereign wealth fund bets that the new merged entity will be in a strong position to benefit from economic recovery and accelerate infrastructure projects amid government stimulus programs. As part of the offer, Arkan will issue a convertible instrument to "Industries," which is controlled by ADQ and owns Emirates Steel. The two companies stated on Sunday that the value of the Arkan deal is 1.4 billion dirhams, and Industries will own about 87.5% of the combined group upon completion.
Industries stated in an official statement: "This will be the first time investors can access a steel product in a public market in the UAE, and it is expected to have a positive impact on overall demand and the liquidity of the merged group's shares."
**Details of the Offer:**
- Replacement price of 0.798 dirhams per Arkan share, the same as the closing price on Thursday.
- Arkan's shares have doubled from their low in July 2020.
- Rothschild & Co has been appointed as the financial advisor for Industries and its stakeholders.
- The deal may close in the second half of the year if the Arkan Board of Directors recommends acceptance of the offer.
Emirates Steel Industries was established in 1998, closely linked to the long-term economic plans of the Abu Dhabi government two decades ago.
