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Wed 20 Jan 2010 03:04 PM

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Dubai Group may sell Oman investment firm stake

Firm may sell 41% stake as Dubai seeks to address debt issues - sources.

Dubai Group, owned by the Gulf emirate's ruler, may sell its 41 percent stake in Oman National Investment Corp, three sources familiar with the matter said, as Dubai seeks to address mounting debt issues.

Dubai has been at the centre of a debt storm since flagship conglomerate Dubai World rocked global markets on November 25 with a request to creditors for a standstill agreement on $26bn worth of debt.

Dubai Group, an investment vehicle whose parent company Dubai Holding is undergoing a transformation to help it weather the crisis. Based on a share price of 0.544 rial at 0745 GMT, the 41 percent stake in ONIC is worth just over $90m.

In October, Dubai Group said it would reassess its investment strategy and was reviewing options to sell its stake in Malaysia's Bank Islam. In December, it sold a 7 percent stake in Egyptian investment bank EFG Hermes for $120m.

"We expected some rethinking on the strategy and on which assets to divest and this is proving to be consistent with that," said Ali Khan, managing director and head of brokerage at Arqaam Capital. "We will likely continue to hear about other assets being divested that don't fit the group's strategy."

Talks with ONIC are in the preliminary stage and no written mandate has been agreed upon, the sources said.

However, it could be difficult for Dubai Group to get a "significant" premium for its stake as ONIC stock has risen on hopes the Oman investment firm may reach a separate deal to sell one of its insurance subsidiaries, one of the sources said.

"ONIC has been in the market trying to sell their insurance subsidiary and the stock has been rising on that," the source said without revealing more information about the deal. ONIC shares have risen more than 60 percent in the past six months.

A potential stake sale will have "no impact" on ONIC's short-term prospects, said Mohammed Hassan, general manager of United Securities LLC.

Executives at Dubai Group and ONIC would not comment.

Dubai Holding bought a 35 percent stake in the Omani firm in 2007 from Shuaa Capital through its investment arm, Dubai Financial, a unit of Dubai Group.

Dubai Holding has about $1.9bn of debt maturing in the first half of 2010. (Reuters)

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