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Thu 10 Mar 2011 06:07 PM

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Dubai Aluminium in talks on joining Emal under new holding firm

Abu Dhabi's Mubadala has offered to buy a stake in state-owned Dubai Aluminium

Dubai Aluminium in talks on joining Emal under new holding firm
METALS PRODUCTION Mubadalas deal will create a new holding company - which includes Emirates Aluminium Co (Emal) - that will have a production capacity of 2.5 million tonnes annually (Bloomberg Images)

Abu Dhabi's Mubadala has offered to buy a stake in state-owned Dubai Aluminium (Dubal), a local daily reported on Thursday, a deal that will give Dubai funds to repay debt and help consolidate the nation's aluminium industry.

Investment fund Mubadala's deal will create a new holding company which includes Emirates Aluminium Co (Emal) - a joint venture between Dubal and Mubadala - and will have a production capacity of 2.5 million tonnes annually, Dubal chairman Sheikh Hamdan Bin Rashid Al Maktoum was quoted as saying by the Gulf News on Thursday.

Sheikh Hamdan, who is also Dubai's deputy ruler and UAE finance minister, spoke at a news conference event to discuss Dubal's annual results.

"Until now no percentage [shares] was specified but I think it's a good share. They are not negotiations, but offers," he said, adding it was unclear what percentage of shares Mubadala will agree to buy.

Dubai, hit by a crippling debt crisis, has undergone a bout of debt restructuring and must sell assets to repay creditors of state-linked conglomerate Dubai World and dig out from under a massive debt pile.

Dubal - one of Dubai's profitable assets - is currently valued at $7bn, according to its vice chairman Ahmed Humaid Al Tayer, the paper said. Its net profit for 2010 more than doubled to AED2.13bn ($580m).

"In case of Dubai, the timing of this sale is good since oil prices are not expected to fall in near future and the strategy of the sale may not be linked to debt burden or the crisis faced by various entities in the past," said Suketu Sanghvi, head of structuring and investments at Essdar Capital in Dubai.

A Mubadala spokesman declined comment on the offer on Thursday but said the two sides were looking at ways to expand their partnership.

"These ongoing discussions have always been aimed at improving the scale and standing of our national aluminum industry on the global stage," Mubadala said in a statement.

The glitzy Gulf Arab emirate is estimated to have about $115bn in debt, accumulated during a six-year boom that led to ambitious projects such as islands in the shape of palm trees.

Dubai could sell non-core investments under the emirate's sovereign wealth fund, the Investment Corporation of Dubai (ICD), such as stakes in Union National Bank, Dubai Aluminium, and Borse Dubai, investment bank JP Morgan said in a research note in February.

"We are talking about profits of AED2bn for Dubal. So it doesn't look like a distress type of deal. I see it more as a merger of two successful ventures," Mohammed Yasin, chief investment officer of CAPM Investment in Abu Dhabi, said.

Mubadala has played a key role since the financial crisis in supporting government-related entities to restructure debt and keep them afloat.

It recently supported the bailout plan of property developer Aldar Properties and district cooling firm Tabreed.

The state-owned investment vehicle has stakes in AMD and Ferrari, as well as General Electric and private equity firm Carlyle.

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