Itqan Investments owned by Sheikh Hamad Al Sulaiman, together with Tamar VPower Energy Fund and CITIC Pacific Ltd yesterday announced the acquisition of Byrne Group, the GCC’s most diverse supplier of rental equipment, including power rental solutions, in a deal valued at AED1bn.
Sheikh Hamad Al Sulaiman explains the deal, and why the rental/lease model is set to expand in this region.
Why now for the deal?
The owners were interested in selling and we were interested to buy. So the timing really was set by them. But at the same time we're very positive on the GCC market in general and think there's going to be tremendous growth in the next five years. So we're capitalising on that and we're capitalising on the Byrne model that we can roll out into other geographies.
Tell us more about the structure
I led this acquisition. Byrne is headquartered in the UAE. I am the biggest shareholder. And that's basically it. Between me and my partners, VPower and Citic Pacific, we are acquiring 100 percent.
What areas of the Byrne business will you develop?
Most of our sectors can grow. But we're concentrating more on oil and gas because we haven't been big in it before. So we are going to expand dramatically in oil and gas. We enable efficiency through equipment rental solutions and that could be midstream, upstream or upstream.
We are not restricted in what equipment this might be. We think of ourselves as a rental solutions provider and we are not restricted to any single line of equipment. In some cases we supply industries with 80 percent of their needs, including maintenance, safety and sometimes even operations.
Why have you got so much faith in the expansion of the oil and gas industry?
We're not looking at an expansion of this sector. We're just bringing a lease solution to what is already a massive industry. To give you a better understanding, in our region, and not specifically in oil and gas, but in industry generally, the amount of rented equipment that businesses use does not exceed seven percent.
But when you look at more developed countries like Europe you're looking at 80 percent of all equipment that is leased. That's very important because it gives an indication of how much room there is for growth.
Why is it time we caught up with the rental/lease model?
We're not reinventing the wheel. Most companies are better off investing their equity in growth strategies, and companies are now realising that it is better to be asset-light to allow them to grow because it frees up their cash to do so. Some people do not understand this properly and they calculate equity as if it is cost of borrowing.
But equity is minimum 15 to 20 percent, so if you're putting your equity into a piece of equipment you need to calculate your costd at around 20 percent.
However, in the past there haven't been rental companies here that give businesses a solution to the standard that global companies expect in terms of safety, maintenance and the right certification.
Tell us more about your megapower plans
Our new partner, V Power, is a leading provider of power solutions globally and has been extremely successful, growing above 100 percent annually. It provide 200 mega in a four-month operation, whereas Byrne has previously been able to supply 40 mega.
This ability has allowed them to grow at this tremendous rate in the past two years. And we believe that experience will add a lot of value to us as a company. They also have extensive experience in solar, and we are starting to get into solar solutions.
What opportunities do you see in Asia?
In the GCC we have a successful model that is also anti-cyclical, so how do we roll it out in other places? Our new partners will give us their experience in megapower and we can give them our successful rental/lease model. It's a match made in heaven for us to roll out in Asia. Plus a lot of our clients are global so we try to move wherever they are.
How much do you expect to grow?
On average we've experienced 20 percent growth over the past five years. I feel comfortable that the core business as it stands will continue to do that. But we have other initiatives to put on the table that will add to that, such as megapower and oil and gas solutions, and we may look at acquisitions. We also see a move toward solar and we see big things in the future of battery technology. I personally believe that this is going to be a very disruptive industry.
Do you have plans for an IPO?
Yes there is but I don't see it happening for three years at least.
Are you bullish on the regional economy in general?
Yes, for example, we are already seeing tremendous activity with Saudi Arabia's Vision 2030. And you have the Ruwais plans [in February Adnoc announced plans to invest $3.1bn in an oil refinery] along with Expo 2020, so we are seeing a pickup throughout the region. But at the end of the day I believe in the Byrne model - you can't sell something that will not sell itself. We have the infrastructure and we're moving to a new phase which can expand rapidly.For all the latest industry news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.