Abu Dhabi fund ADQ offers to create large hospitality group

Abu Dhabi sovereign investment fund ADQ has submitted an offer to create a company with $5.4bn in assets in a “strategic combination” of two local hospitality groups, part of an effort to form a larger entity that will support the emirate’s long-term diversification plans.

ADQ has proposed combining Abu Dhabi National Hotels Company with one of its portfolio companies, Abu Dhabi National Exhibitions Company, according to a statement on Wednesday. ADNH shares jumped as much as 15 per cent on Wednesday, the maximum allowed by the local exchange, and headed for the highest closing price since 2010.

The proposed transaction “would create one of the largest hospitality, events, and catering powerhouses in the region” and would help attract more tourism and business travel to the emirate, ADQ said.

• The combined group would have assets of approximately $5.4bn as of December 31 2020, including a portfolio of 28 owned and operated hotels, three large exhibition centers in Abu Dhabi, Al Ain and London, in addition to catering companies and food and beverage outlets
• The combined group would be well-positioned for revenue growth opportunities and cost synergies, along with a stronger, more efficient capital structure. The transaction is expected to be “earnings accretive shortly after completion”
• ADNH will issue to ADQ a convertible instrument that would convert into 1,221,374,045 ordinary shares in the capital of ADNH upon closing of the transaction. The price at which the instrument will convert into shares in ADNH is Dhs3.93 per share.
• The offer implies an equity value of approximately Dhs3.93bn for ADNH. Following completion, ADQ would own approximately 54.98 per cent of the entire issued share capital of ADNH.