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The $100 million deal gives Alec a business with a deep background in oil and gas and positions it to play a leading role in the energy transition
Dubai-based contractor Alec has completed the acquisition of Abu Dhabi-based contractor Target Engineering Construction Company. The $100 million deal creates a contracting group that spans multiple industries and plans to double its turnover over the next five years.
Alec is one of the region’s leading building contractors and is working on landmark projects such as A Zabeel in Dubai with Abu Dhabi Natural History Museum.
Target is an engineering, procurement and construction (EPC) contractor engaged in oil and gas projects, including Borouge 4 petrochemical complex in Abu Dhabi and the northwest development of the Dalma field, also in Abu Dhabi.
The ambition to double in size
Target, formerly owned by Arabtec, has an annual turnover of about AED1.5 billion (US$408 million) and is an important complement to Alec’s business.
“Target will account for about 30% of our [combined] turnover,” said Alec CEO Kez Taylor.
“Looking forward, we see both companies growing as both Alec and Target need to do work. We expect both companies to double in size over the next five years.”
Although both Alec and Target are contractors, their businesses are complementary.
“It’s a perfect fit for us,” Taylor said. “We do complex construction work; they do oil and gas, energy and marine.”
We’ve been able to save 11,000 jobs and keep a company afloat
John Deeb, Chief Financial Officer, Alec
21,000 employees
In terms of manpower, the group is currently one of the largest in the region. Target’s 11,000 employees add Alec’s 10,000 for a total of 21,000 employees.
“We felt like we had a good mix of cultures because they were contractors and similar to us. When we interacted, we spoke the same language,” Taylor said.
While the two companies will assist each other and work together, in terms of management, Target will continue to have its own management.
“Target will operate Target, and we will allow them to operate,” Taylor said.
Financial status
Alec was able to complete the acquisition due to its strong financial position.
“We don’t have debt as a business. For years, we’ve actually avoided talking about it. We have a strong balance sheet, which is why we were able to take such a move,” Taylor said.
Target up for sale after its previous owner Arabtec files for bankruptcy in 2020.
“It started with the collapse of Arabtec,” said John Deeb, Alec’s chief financial officer. “If you look at Alec in the past, we’ve never really done a big acquisition. We’ve grown our business organically, so we’re not looking for [to acquire].
“Oil and gas is an area we’ve been focusing on. We want to do something and then When Arabtec went bankrupt, we talk to people about the good things about Arabtec because obviously it’s not all bad. Goals are one thing that stands out. “
Bankruptcy Law
Arabtec’s bankruptcy has been a key test of the UAE’s insolvency laws, which came into force in late 2016.
“This deal is one of the first to show how the process works,” Deeb said. “We’ve been able to save 11,000 jobs and keep a business going.”
Acquisition proceeds
This acquisition helps Alec diversify into one of the most dynamic industries in the region.
“We’re focused on the high-end construction market. We haven’t done roads, bridges — we’ve decided to stay away from that, but oil and gas does make more sense because the barriers to entry are higher and it’s more challenging work,” Deeb Say.
Strong economic fundamentals and the growing importance of the energy transition support the investment outlook for projects in the oil and gas sector.
“The UAE has the capacity to produce 4 million barrels per day (b/d) and they want to increase that to 5 million b/d by 2027. In Saudi Arabia they are producing around 10 million b/d and they want to increase that To 13 million barrels per day. The UAE increased by 25%, Saudi Arabia increased by 30%. On top of that, you have net zero targets,” Taylor said.
Geographically, the group’s two main markets are Saudi Arabia and the United Arab Emirates.
“There’s a lot of work to be done. Alec’s market share in the UAE is about 2 percent, and in Saudi Arabia we expect it to be about 1 percent,” Taylor said.
Saudi gigaprojects poised for $569bn contract award
The construction industry will also play a key role in helping the UAE and Saudi Arabia achieved their long-term economic aspirations.
“The UAE wants to be The world’s leading countries and economies by 2071 10% of GDP by construction industry,” Taylor said.
“Saudi Arabia and the UAE are very much aligned in their ambitions and we believe we can play an important role in making this happen.”
Watch: Saudi Arabia gigaprojects market prospect
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