Orascom Construction and OCI Global: A Strategic Merger in Abu Dhabi
Overview of the Merger
Orascom Construction, listed on the Abu Dhabi Securities Exchange and headquartered in Cairo, is in discussions to merge with OCI Global, a Netherlands-based company. This potential merger aims to create a robust global infrastructure and investment platform based in Abu Dhabi. The collaboration is expected to leverage the strengths of both companies, enhancing their market presence and operational capabilities.
Structure of the Proposed Merger
The proposed structure indicates that Orascom Construction would acquire OCI Global, which is incorporated in the Abu Dhabi Global Market (ADGM) and primarily listed on the Abu Dhabi Exchange (ADX). As negotiations progress, the specifics of the share exchange ratio for OCI shareholders will be determined following a thorough due diligence process and relative valuation assessments. Following the merger, OCI Global is expected to be liquidated and delisted from Euronext Amsterdam.
Financial Performance
Both companies have demonstrated impressive financial results in their recent fiscal year. OCI Global reported total operations revenue of $4.08 billion, with an adjusted EBITDA of $826 million. Meanwhile, Orascom Construction achieved a revenue of $3.25 billion, alongside an adjusted EBITDA of $158.3 million and an adjusted net income attributable to shareholders of $117.3 million. These figures highlight the financial strength and operational efficiency of both entities, setting a solid foundation for the proposed merger.
Legacy and Market Position
Orascom Construction has a rich history dating back to 1950, founded by Onsi Sawiris. Over the decades, it has built a reputation for delivering high-quality projects and fostering strong partnerships globally. Today, it ranks among the top 30 international contractors, recognized for its engineering, procurement, and construction (EPC) capabilities.
OCI Global, established in 1999, has made significant strides in the cement, nitrogen, and methanol sectors. Notably, it pioneered the world’s first large-scale greenfield blue ammonia plant in the United States, showcasing its commitment to innovation and sustainability.
Historical Value Creation
Historically, the combination of Orascom Construction and OCI has led to substantial value creation. The two companies have previously collaborated in the cement and natural gas sectors, resulting in approximately $22 billion in dividends distributed to shareholders and an impressive internal rate of return (IRR) of around 39%. This track record underscores the potential benefits of their renewed partnership.
Benefits of the Merger
Complementary Strengths
The merger promises to unite the complementary strengths of both companies. Orascom Construction brings world-class execution capabilities, supported by a substantial backlog of $14 billion and extensive experience in delivering complex infrastructure projects across various regions, including the United States, GCC, Egypt, Europe, and emerging markets. On the other hand, OCI Global contributes its institutional investment platform and expertise in disciplined capital allocation, enhancing the overall operational capacity of the new entity.
Enhanced Financial Strength
The merger is set to consolidate the financial resources of both companies, creating a stronger balance sheet. This enhanced financial position will facilitate investments in large-scale infrastructure projects through various channels, including equity and credit. Leveraging Orascom Construction’s established experience in infrastructure will further amplify the new entity’s capabilities.
Diverse Infrastructure Opportunities
The combined entity will provide a globally diversified platform, capitalizing on Orascom Construction’s extensive track record. This includes access to a pipeline of infrastructure opportunities across multiple sectors such as digital technology, aviation, transportation, power, and water. The new company will also benefit from leadership credentials in delivering landmark projects, including data centers and other significant industrial investments.
Conclusion
As Orascom Construction and OCI Global move forward with their merger discussions, the potential for creating a powerful infrastructure and investment platform in Abu Dhabi is evident. By combining their strengths, financial resources, and industry expertise, the two companies are poised to make a significant impact in the global infrastructure landscape.
