Best Of: Tracking the mysterious rise of a UAE company

This is an audio transcript of the Behind the Money podcast episode: ‘Best Of: Tracking the mysterious rise of a UAE company’

Michela Tindera
Hey there. It’s Michela. You know the links to FT articles that we include every week in our show notes? I wanted to let you know that for a limited time this summer, we’re making those articles free to read for all Behind the Money listeners. So check out our episode and then dive even deeper into the FT’s top-notch journalism without a paywall. Thanks and enjoy.

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It’s a truth universally acknowledged that all companies want to grow. But the company we’re gonna be talking about in this episode, its growth has been off the scale.

Andrew England
Its share price since 2019 has risen more than 40,000 per cent, and it’s got a market capitalisation of close to $240bn. That’s more than double the market cap of GE or Siemens.

Michela Tindera
That’s the FT’s Andrew England talking there. And the reason his interest in this company was piqued was not just because of its growth. It’s also because of where this particular company operates.

Andrew England
It’s the second-largest listed stock in the Gulf region after Saudi Aramco, the state oil giant.

Michela Tindera
Andrew’s the FT’s Middle East editor. And he’s talking about International Holding Company or IHC. And over the last couple of years, it seems to have appeared out of nowhere.

Andrew England
It started out as a relatively unknown small company with interests in fish farms, some real estate, a couple of other things.

Michela Tindera
But today, International Holding Company is a behemoth. It’s a publicly traded conglomerate listed on the Abu Dhabi Securities Exchange in the United Arab Emirates. And it’s a conglomerate in one of the biggest ways you could picture that word.

Andrew England
IHC is this kind of sprawling network of companies. It claims to have more than 400 subsidiaries, and that can range from anything from agriculture to healthcare, leisure and retail, they’ve got entities involved in the maritime sector. So it just crosses a kind of a vast array of sectors.

Michela Tindera
Some of IHC’s biggest subsidiaries are themselves listed companies. One of those is so large it claims to have more than 100 subsidiaries of its own. IHC also has made investments in firms ranging from India’s Adani Group to Elon Musk’s SpaceX. In other words, its tentacles has spread around the world.

Andrew England
You know, its assets have gone from something like $215mn in 2018 to $54bn as of September last year. That’s an incredible growth.

Michela Tindera
So how did IHC do it? How did it get so big?

Andrew England
People who are veterans of the Gulf, the UAE, you know, I’ve been talking to them about this company and they literally are just scratching their heads.

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Michela Tindera
I’m Michela Tindera from the Financial Times. Today on Behind the Money, we’re gonna tag along with one reporter as he’s tracked the rise of this mysterious company in the UAE. He’s gonna tell us what he’s found so far and what all of that could mean for other companies around the world.

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For Andrew, this story begins with one of the most powerful figures in the UAE.

Andrew England
A gentleman called Sheikh Tahnoon bin Zayed al-Nahyan, he’s a brother of Sheikh Mohammed bin Zayed, who is the president of the UAE and he is the ruler of Abu Dhabi.

News clips
M-B-Z . . . They call him MBZ because it’s easy to remember. His name is Sheikh Mohammed bin Zayed al-Nahyan . . . He is one of the most powerful men on Earth, and yet the ruler of the United Arab Emirates maintains a relatively low profile on the world stage.

Michela Tindera
What you need to know is that the UAE is a federation ruled by royal families. Abu Dhabi is the richest of seven emirates, and Sheikh Tahnoon’s family has been in charge for centuries. So he’s royalty and he has influence.

Andrew England
He’s in his mid-fifties. We know that he’s a martial arts expert and he’s an avid cyclist as well. He’s a very fit guy. He’s always had a deep interest in business. Smart guy, by all accounts. Not particularly ideological, pretty pragmatic.

Michela Tindera
And he has a certain mystery about him, too.

Andrew England
He’s a really interesting character because not really, not a lot’s been known about him. Not a lot’s been written about him. But over the last few years, he’s come to increasing prominence.

Michela Tindera
Within the Gulf, Andrew says it isn’t necessarily uncommon for the lines to be blurred between royal family members, the state and the private sector.

Andrew England
What’s interesting is how his business interests or his linkages to business, be it private sector or state, have become much more in the open in recent years.

Michela Tindera
So that pushed Andrew and our colleague Simeon Kerr to want to write about Sheikh Tahnoon a few years ago.

Andrew England
We were doing a profile of him and looking into his interests and kind of the nexus between politics, power and business in Abu Dhabi.

Michela Tindera
Picture Sheikh Tahnoon at the centre of a sprawling web of government and business roles in the UAE. Just to name a few: he’s the country’s national security adviser; he chairs a state investment vehicle and the UAE’s biggest bank; and then, of course, there’s IHC. He became its chairman in April 2020.

Andrew England
Having a company with tentacles in lots of different pies, I mean, it’s not unusual to have conglomerates in the Gulf. And that’s whether it’s merchant families or members of the royal family. But I think what sets this aside is just again, is the scale of growth, both in terms of its share price, in terms of its asset growth, in terms of its reported profit and revenue growth, and how it has come to dominate the stock market.

Michela Tindera
Put simply, Andrew’s reaction was . . . 

Andrew England
Well, what the hell is going on with this company? And back then, IHC was still nowhere near the size that it is today.

Michela Tindera
Now, Andrew and Simeon published their story on Sheikh Tahnoon back in January 2021. And if you’re wondering, he did not do an interview with the FT for that.

Andrew England
No, he’s not someone who meets people like me.

Michela Tindera
But they still had plenty of questions about this one growing slice of his empire. Its assets and profits just kept getting bigger and bigger and bigger. And as IHC got bigger, so did the stock exchange that it’s listed on.

Andrew England
The Abu Dhabi Exchange has been a pretty kind of marginal exchange. But over the last four years, its market capitalisation has more than quintupled. So now it’s got a market capitalisation of $650bn, which puts it in the top ranks of the Middle East stock markets.

Michela Tindera
So Andrew observed IHC’s rapid growth and the growth of the Abu Dhabi Securities Exchange, or ADX. And he wanted to understand how it was all happening. But reporting that out wasn’t a simple task.

Andrew England
Let’s just start by saying that, you know, if you’re in the UAE, this is quite a sensitive topic. So the UAE is an absolute monarchy. It’s an autocratic state. And given the links this company has to a senior member of the ruling family of Abu Dhabi, you know, people are pretty careful about what they say. And they’re gonna be cautious about their identities being known, about being quoted on the record, et cetera, et cetera. So who do we speak to? We speak to people who watch the market. But to be honest with you, a lot of the responses we got when we spoke to people was: “We just really don’t understand it. We can’t explain to you what’s happened because we ourselves don’t understand it.” And despite it being such a major stock, obviously the largest stock on the ADX, people were just kind of scratching their heads. So we started doing more asking around, digging around.

Michela Tindera
There is also the issue that no independent market research had been published about this company. On top of that, it didn’t have a credit rating. If it had one, there’d be more information on IHC from ratings agencies. It was all very opaque. So Andrew and Simeon decided they needed to hear from the horse’s mouth itself — IHC.

Andrew England
We decided how best to write this story, and we felt that by getting an interview with the CEO, we would be able to put a lot of these questions to them and hear what they have to say about them.

Michela Tindera
The company’s CEO is named Syed Basar Shueb.

Andrew England
He’s kind of a polished-looking figure. He’s got a very nice, neatly trimmed sort of silver beard, who’s wearing the traditional thawb that’s worn in the Gulf. I would probably put him in his late forties, early fifties, that kind of age. Amenable guy, seemed very comfortable in his position.

He has a kind of a history of working in the conglomerates controlled by Sheikh Tahnoon. He’s clearly someone who’s trusted by the sheikh.

Michela Tindera
Andrew says he had a lot of questions for Shueb. But these three were the most important . . . 

Andrew England
First, we’re just trying to understand how they would explain this incredible growth. So just trying to understand how would they try and explain it.

Michela Tindera
Second . . . 

Andrew England
Why, for a company of this size, why there wasn’t any independent market research on the entity, which, you know, would be typical normally for a company of this size.

Michela Tindera
And third . . . 

Andrew England
What are they trying to achieve? What is going on here and what is the goal?

Michela Tindera
The quality of this recording isn’t great, but you can hear Shueb speaking a bit during his interview last year.

Syed Basar Shueb
The whole idea, the whole reason is one simple thing — create value for our shareholders by investing into different portfolio. Not one stream of investment, but different streams of investment.

Michela Tindera
Andrew says they talked for about an hour.

Andrew England
They were charming, insisted that their books were open, kind of batted off the concerns we raised, the people have raised of us about the rise in the share price. You know, he said that local investors, when they spoke to them, they understood the company’s story. They were happy. We asked them, you know, why the company didn’t have any independent research done on it. He said, well, that was up to others, not to them. We asked about whether the company was seeking a rating from a credit agency. He said they had gone through that process, but there was an issue over what the company should be compared with.

Michela Tindera
Shueb explained that IHC had grown through a transfer of assets from a company called Royal Group. Now, there are a lot of company names that we’re talking about here. But it’s important to note that Royal Group is yet another company in Sheikh Tahnoon’s web that we mentioned earlier and it’s actually the majority shareholder in IHC. And when Andrew asked about why — why they were trying to become this massive company in the first place . . .

Andrew England
You know, what do they tell us, that their main aim is to create value for their shareholders and they wanna create growth. They wanna create a global giant. The CEO was very clear to us that he has a sizeable war chest and they’re looking at expanding their global footprint in Asia, in Latin America.

Michela Tindera
How did you feel after? And did you feel satisfied that your questions had been answered?

Andrew England
No. I think it’s very, very difficult to explain the growth of this company. Clearly, it has been a very active company over the last three years, and clearly a lot of assets have been transferred to it. But that only explains some of the story or it can only explain some of the story.

Michela Tindera
This transfer of assets was one part of IHC’s story that Andrew felt like he still needed to understand better. So he followed up with the company to try and get some more clarity on exactly what was transferred and for how much. Remember, IHC’s total assets had increased by more than 25,000 per cent in the span of four years, from 2018 to 2022.

Andrew England
So we asked him for a list of those assets so we can have a look and see just, you know, what they actually brought to the company. And after the interview, they sent us a list of more than 40 companies, with their valuations of those companies. And the total valuation came to $4.7bn.

Michela Tindera
In other words, IHC’s numbers just did not add up.

Andrew England
We’ve seen the company’s total assets rise to $54bn. So you know, even if you assume that these companies came in at 4.7bn and their values have gone up, then you’ve still got this kind of massive gap between what the company’s assets were. So clearly, there’s this, a huge amount (chuckles) to account for. And I just wasn’t convinced that those assets on their own sufficiently accounted for that.

Now, IHC would come back to us and say, well, not only were the assets transferred, but then they grew and they’ve been very successful. But again, it kind of makes you feel that we’re not seeing the whole story here.

Michela Tindera
Could its growth be linked to the boom in oil prices? Abu Dhabi is a big producer.

Andrew England
Yeah, I mean, certainly last year when oil prices initially went well over $100 a barrel, they went to the highest level since 2008. You know, some of the big winners were the Middle East oil producers and the UAE. So that’s given them a significant petrodollar windfall, which, you know, obviously gives them surpluses to put into their sovereign investment funds, their sovereign wealth funds, et cetera. And it kind of gives them a confidence as well. IHC is a little bit different because it’s not a state entity. So in theory it’s not receiving state resources, it’s not receiving any of the petrodollar revenues because that goes to the state. So I mean, the growth, the rapid transformation of IHC, you know, started well before last year’s oil boom. But I think what we’re seeing at IHC would have happened and was happening with or without an oil boom.

Michela Tindera
Earlier this year, Andrew and Simeon published their first article on this company. The headline of that story was ‘The UAE business that went from obscurity to a $240bn valuation in 3 years’. But they still had a lot of questions and that wasn’t the end of their reporting.

Andrew England
We wanted to keep reporting on the company. So I sat down again with some market analysts and went back through the financials. And one thing we came across, which was quite interesting, which a couple of people have suggested to us, was that if you looked at the way in which IHC’s shares are traded, a lot of the trades are in blocks that are of the same volume and at the same time.

Michela Tindera
Now that is quite different from how you typically see shares traded in a publicly listed company.

Andrew England
So you think normally a trade in a share is very random. You know, you buy five shares, I buy 100 shares, someone else buys six shares and so on and so on and so on. Instead of that, if you look at the data on IHC’s shares, you see that there are very often multiple trades of the same volume at the same time, again and again and again.

Michela Tindera
Andrew compared these patterns to how two other big stocks on the ADX were traded.

Andrew England
What we can say is the pattern of the share trade looks abnormal compared to other stocks on that market.

Michela Tindera
Over a three-year timeframe, between 2020 and 2023, he found that two-thirds of IHC’s transactions were done in this bulk trading style. When he compared that to these two other companies on the ADX over the same period, this pattern was found in less than 10 per cent of trades.

Andrew England
And this goes back to what market analysts suspect shows is pre-arranged orders in the shares. So one party agreeing to buy a certain amount of shares from another party.

Michela Tindera
Market analysts also said that it can be hard for investors to buy IHC’s stock. Sheikh Tahnoon’s Royal Group, which we mentioned earlier, owns nearly two-thirds of the company’s stock. And beyond that, its 2021 annual report showed that just 18 shareholders owned about 97 per cent of the company’s stock. So that doesn’t leave much room for investors in the public market to buy and sell.

Andrew England
So, you know, I guess the question is why, right? The stock owners that share ownership is kept within a very small pool of people? What are they trying to achieve with this?

Michela Tindera
There’s no suggestion of illegal activity by IHC. And the company responded to the FT’s questions about this reporting. It said its shares are available to the market at a price for anyone who wishes to invest, adding that it was, quote, “open, true and direct with information about our organisation, while adhering to market regulators’ governance and compliance standards”, end quote.

Andrew says he also asked the ADX about these trades. The ADX says that it operates to the highest principles of corporate governance and transparency, adding that listed companies, quote, “must adhere to comprehensive disclosure guidelines that are in line with global standards”, end quote.

Andrew England
But again, you’ve got to remember that where this is happening . . . this is not happening in New York. This is not happening in London. This is not happening in Paris. This is happening in a Gulf state, which is an autocracy. There isn’t the same level of debate, the same level of interaction that you would have if it was happening somewhere else, if you like.

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Michela Tindera
Andrew published another story about these trades last month and he says he still has big questions about IHC. But at this point I wanted him to pause for a minute and tell me what he felt like he’d learned so far, after following this company for such a long time.

What does following this story, so far, taught you about Abu Dhabi? And what it’s like to do business there?

Andrew England
What it tells me about Abu Dhabi, it kind of shows that while there’s always talk of developing the private sector, there’s always less space for the private sector to operate. If you’re running a company in Abu Dhabi, how do you compete with these kind of companies that they have the political backing, the financial backing and the scale? What’s left for you to compete with?

Michela Tindera
And what about elsewhere in the country?

Andrew England
It’s very different to Dubai. Dubai produces negligible oil. Dubai needed to diversify, needed to develop, it needed to create the brand that it has today to attract tourists, to attract business, to attract finance. Abu Dhabi is just incredibly wealthy, and they just seem comfortable with this economy where the grey area between the state and the private sector is allowed to exist. And this is the clearest example of it in many ways.

And if you look at Sheikh Tahnoon’s businesses empire, which crosses all those lines, I mean, IHC is a private company, right. It’s a private listed company. But he is also on ADQ, which is a state investment company. And then he’s the chairman of First Abu Dhabi Bank. So one, it’s incredible, the reach this one guy has. And two, it just reinforces the sense that ultimately it is the state and its affiliates which are dominating the economy there.

Michela Tindera
What do you think this story tells us about transparency?

Andrew England
You know, I think it clearly raises questions about transparency when it’s just such a big part of the ADX market. And there are so many people who tell us they don’t really understand what it is. I mean, we were told by IHC’s CEO that he wants to create a global giant. OK, fair enough. But what is the ultimate aim of creating such a sprawling network of entities that seem to overlap, seem to be dependent on each other, have all these kind of shared interests through the assets and the way the assets have been moved around? What are they actually trying to create? I mean, saying you wanna create a global giant is one thing, but what is driving this? And what is the end goal? And that, we just really do not know.

Michela Tindera
So there are plenty of unknowns here, and IHC only wants to grow larger. Andrew expects that will raise more questions about how the company will operate in the broader international business world.

Andrew England
So you know, I think the more ambitious and the more global IHC intends to become, then the more it interacts with, you know, international companies and the more it’s gonna come under scrutiny in terms of its transparency and what its strategy and aims are.

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Michela Tindera
Behind the Money is hosted by me, Michela Tindera. Saffeya Ahmed is our producer. Topher Forhecz and Manuela Saragosa are our executive producers. Sound design and mixing by Sam Giovinco. Special thanks to Simeon Kerr. Cheryl Brumley is the global head of audio. Thanks for listening. See you next week.

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