Bahrain International Bank arranges management buy-out

21 January 1994

Bahrain International Bank (BIB) has arranged and underwritten a $16.3 million management buy-out of Nico Middle East of the UAE. BIB, which now owns the majority of shares, is negotiating with Gulf investors interested in buying part of Nico.

Nico, a ship repair and oil field services company, was formerly owned by NCC AB of Sweden. A 12-member management team bought 20 per cent of shares, with BIB taking the remainder. BIB plans to reduce its stake to less than 50 per cent by selling shares to Gulf investors. It is already negotiating with potential investors involved in the industry, assistant general manager for corporate finance David Knight says. The plan is for BIB and part of the management team to sell their shares within five years. This is likely to happen through regional stock exchanges.

Nico's activities include repair and maintenance services, mainly for Abu Dhabi's oil industry; ship repair businesses in Dubai and Fujairah; and owning and operating several supply and service vessels for the offshore construction industry. Its annual income is about $25 million, and it employs 500 people.

'We think there will be more of this sort of transaction in the future. The legal and commercial environment, particularly in countries like Bahrain and the UAE, is now better designed to give structural support to management buy-outs,' Knight says. The ability to sell shares to non-GCC nationals on the stock exchange gives banks and management teams the means of achieving greater returns, he explains. 'In fact, since we signed this deal, we have already been approached by another management team,' he says.

Other recent BIB developments include:

The placing of $10 million of a $60 million US mortgage securities fund with Gulf investors. BIB set up the fund in joint venture with Lehman Brothers of New York. Lehman has placed the remainder of the fund in Asia.

The raising by its US real estate fund of $15 million. The subscribers were from Bahrain, Kuwait and Oman. Funds raised by the first closing of the American Real Estate & Growth Fund in October fell short of the previously announced $15 million after two investors dropped out near the deadline (MEED 15:10:93). The fund, established in joint venture with the Connecticut-based Coastal Funding Group, has begun acquiring property with a view to achieving an average yield of at least 13 per cent a year. BIB has started looking at real estate development opportunities outside the fund. The plan is to make money available for individual transactions for clients under a co-investment scheme.

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