Three years ago, International Holdings was a little-known company with businesses in fish farming, food and real estate. It employs only 40 people. Today, the Abu Dhabi-listed group has a market capitalization of $240 billion, more than twice that of global giants Siemens and General Electric, and employs 150,000 people.
It’s an extraordinary shift that has gone largely unnoticed outside the United Arab Emirates and is poorly understood — even by bankers in the region.
“Nobody knows,” said one Gulf-based international banker when asked to explain IHC’s dramatic growth. Although it accounts for a third of the FADX 15, the Abu Dhabi Securities Exchange’s ADX benchmark index, this was a common response to questions about the group. It has become the Middle East’s second-biggest listed company after state oil company Saudi Aramco, as its shares have soared 42,000% since 2019.
Even Saiba Shashub, who took over as IHC CEO in mid-2019, admits “it’s fantastic”.
In an interview with the FT, he insisted there was a simple explanation for the company’s growth – the transfer of more than 40 companies from another Abu Dhabi conglomerate, the Royal Group, with a combined value of . $4.7 billion. Shueb said most businesses were transferred at a nominal value of Dh1 each.
But that only explains part of the story: IHC’s total assets have ballooned from $215 million at the end of 2018 to $54 billion by the third quarter of 2022.
According to IHC, this is thanks to the growth of the business it now controls. “We don’t pay dividends, and the profit in 2020 and 2021 is mainly … . . Invested back,” Shueb said. “We’re trying to create a giant here . . . a global giant.”
Others, however, see the IHC as an example of the increasingly blurred relationship between business and power in Abu Dhabi, the UAE capital and the federation’s wealthiest member. It also raises questions about transparency.
“This is probably the biggest threat to ADX because we don’t know what’s going on,” the banker said. “There are a lot of great things happening at ADX, but there’s one more thing that no one knows about.”
Officials in neighboring Dubai are no longer considering resuming discussions on a possible future merger of its stock market with ADX amid concerns over IHC’s staggering rise in market capitalization, people familiar with the matter said.
EY said its review of IHC’s latest financial statements for the third quarter of last year was “substantially narrower” than an audit conducted in accordance with international standards, so it could not obtain assurance on “all material matters”.
“Due to the limited amount of information required to be provided in the interim financial statements . . . these financial statements will not normally be fully audited by external auditors,” the IHC said.
Company transformation can be carried out in due course Sheikh Tanu bin Zayed Al Nahyan, one of the most powerful figures in Abu Dhabi, took over as chairman in 2020. In addition to serving as the UAE’s national security adviser, he is the brother of the UAE’s president, Sheikh Mohammed bin Zayed al-Nahyan, who oversees a growing business empire.
In addition to his role at IHC, he is the Chairman of ADQ, a new and increasingly active organization National Investment VehicleFirst Abu Dhabi Bank, the largest bank in the UAE, and Group42, an Abu Dhabi-based artificial intelligence and cloud computing company.
He also controls Royal Group, the holding company that owns 62% of IHC. About 24% of IHC’s shares are free float, with more than 90% of its investors coming from the Gulf region.
Shueb said Sheikh Tahnoon’s vision for IHC was “limited to creating value for shareholders”.
“How do we create [value] Cascading to management,” he said.
He dismissed skepticism about what was driving the rapid rise in share prices, saying it was “a little bit of ignorance on the part of the bankers, they didn’t see it properly”.
“Investors who are willing to invest at this market value simply because they have done their homework because they can see that these assets have significant value,” he said. “I believe people expect that certain assets that are still out [with Royal Group] Will come to the IHC group. . . I do not deny that they are likely to come. ”
Shueb tried to explain the organization’s goals as “a simple thing — [to] Create value for our shareholders by investing in diverse portfolios rather than one investment stream.”
“We do acquisitions, we do synergies, and then we immediately diversify,” he said.
For example, if IHC acquires a telecom company, it will integrate it into IHC’s service side and expand into “solutions” and “hardware sales,” he said. In agriculture, the plan is to supply food from “farm to fork”.
He added that the company, which has $10 billion to invest, aims to grow group revenue from $7.7 billion in 2021 to $27 billion in 2023, mainly through acquisitions.
“Our five-year plan is to reach 1tn dirham [$272bn] At least in terms of revenue, our own business is doing very well in terms of acquisitions,” Shueb said.
IHC deals in 2022 include investing $Three Mumbai-listed companies invest $2 billion part of empire Gautam Adani, the richest man in Asia$500 million for a 50% stake in a Turkish clean energy company and $2 billion for up to 31.25% of Colombian food group Grupo Nutresa.
Shueb attributed IHC’s profit to $6.5 billion in the first nine months of 2022, up 236% from the same period in 2021, largely due to investments, including its stake in Adani Corp.
IHC’s focus is technology, healthcare, real estate, construction, food and agribusiness, and general investing, Shueb said. Geographically, it is focusing on Asia and Latin America, and is scouting for deals in markets as diverse as Turkey and Indonesia.
“These are progressive economies; they have population; they have a reasonable system to support all this growth, and at the end of the day, because we’re from Abu Dhabi and the UAE has only 10 million people, I can’t . . . get to 100 million people, but I can reach 100 million people through these companies,” he said.
He added that IHC was also “considering certain transactions” in the US, where it already owns some shares, including a stake in Elon Musk’s SpaceX. However, he believes Europe is “a very uncertain market at the moment”.
“We got a lot of really good deals [in Europe]but [we] Don’t know if these good deals will stay in good shape,” he added.
Asked why no independent research has been done on the group despite its size and dominance in ADX, Shueb said: “It depends on whether they want to do it”.
“When I go to the market for any IPO of my company, I get enough questions from the local investor base . . . they do enough research on our financials,” he said. “Our book is very open.”
IHC had already held discussions with a credit agency about the rating, but the process hit a stumbling block when the agency asked what to compare the group to, Shueb said.
“The team is still working on [on the rating and] It is likely that a solution will be found,” he added.
He said IHC’s debt was about AED10 billion, excluding operating debt of portfolio companies, and it would seek to increase its borrowings as the business expanded. He added that the group had begun developing relationships with international banks, including a “billion-dollar” loan from Standard Chartered, and was working with Goldman Sachs and UBS.
Others still need to be persuaded of the group’s strategy.
“I don’t get it because it’s a $200 billion company with less disclosure than a much smaller entity and the whole complex of listing and unlisting subsidies is very active,” said another Gulf banker .
However, “it’s such a significant source of deal flow that I’m sure some banks are looking at what they can do,” to get involved, he added.