The takeover of jeweller Damas by Qatar-based conglomerate the Mannai Group and investment bank EFG Hermes is a positive indicator of the company's value but may be a disadvantage to minority shareholders, analysts said Wednesday.
The $445 million (Dh1.634 billion) deal, which will see the Qatari company and Egyptian investment bank pay around $0.45 per share, is likely to see Damas eventually taken private and de-listed from the Dubai bourse, they added, a likely negative move for company shareholders.
"The fact that such a big group is coming in to buy the company means they believe there's value there and it is higher than the price it says," said Mohammad Yasin, an Abu-Dhabi based capital markets specialist. He pointed out that the purchase price the conglomerate has agreed to is a 45 per cent premium over Damas' share price before Mannai confirmed its interest in January.
"Once the transaction is over they want to de-list the company and that to me is a disadvantage for the market and the minority shareholder. There's a premium on share price when the company is listed in the market rather when it is privately held," he added. The bid, which has been approved by the board but needs shareholder approval next month, looks set to bring a close to a turbulent two-and-a-half years for Damas, which began when the retailer revealed that its main shareholders had been misusing company funds.
"After the issues Damas faced, this is an ideal partnership," said Haissam Arabi, chief executive of Gulfmena Investments "Al Mannai is a reputable conglomerate and to be aligned with the top investment bank from the region to collaborate together is in best interest for shareholders. It is in the best interest of shareholders given the previous legacy of Damas."
The bid is being recommended unanimously by the Board of Damas and is subject to formal acceptance by Damas shareholders. Mannai has obtained irrevocable undertakings to accept the bid when made from shareholders holding approximately 77.8 per cent of the shares in Damas.
Yasin said that despite his misgivings, shareholders would be wise to hold on to their stake in Damas.
"If shareholders have the option, they would be advised to hold on to their shares, because it may realise higher value than it has now. Once it is restructured and the new owners are in, I wouldn't be surprised to see it list somewhere else, maybe in Qatar," he said.