Oman Economic Review – July 2019

12 July 2019

What are the reasons that prompted
Renaissance Services to proceed with
the sale of Topaz to DP World?
We went in for this deal keeping in mind
what was important for Renaissance at
the present juncture. We had a desire
to de-leverage and become asset light.
When we look at the global and regional
markets, we see that there are very few
positive triggers out there. Our thinking
was that if we are ticking enough
boxes in terms of what we want for
Renaissance, then this deal, perhaps with
the only additional desire of a healthier
valuation, ticked all the boxes that were
important for the company. Sometimes
in business you need to take a long view,
and given the circumstances in the world
today, you can hope for a positive turn of
events, but another negative shock in the
industry might have been a bridge too
far – and hope is a poor strategy. It was
with that in mind that we chose to take
this deal. Overall, it was a mix of these
two reasons, but more importantly it was
about what was good for Renaissance.

As a thumb rule, a downturn is not
considered a good time for an asset
sale as valuations are depressed.
Were there any external pressures
that forced you to proceed with the
transaction?
There was no external pressure or
compulsion that forced us to proceed
with the transaction at this moment.
There are circumstances which we might
have had to negotiate, if we had not
gone ahead with the sale, but these were
manageable but not easy. For instance,
liquidity was tough and we have been

stating that very clearly, but we would

have survived it. Compared to 2019,

liquidity was tougher in 2017 and in the

early part of 2018. There were triggers

like the upcoming obligation towards

Standard Chartered Private Equity/

Affirma Capital (SCPEL), but SCPEL has

been a fantastic partner throughout this

journey with Topaz and have always

been reasonable. But the heavy issue

was that in the past year we had tried

many different avenues and could not

see any near term liquidity solutions and

we had a plan for Renaissance which

could only go into top gear once we had

shifted the overhang of Topaz. Once that

was the prism then valuation became a

relative issue.

Are there synergies between Topaz

and DP World that assured you that

this is a right fit for a company that

you have nurtured and grown over

the years?

For DP World one of their signature

acquisitions a decade or so ago was the

P&O brand. They already own Maritime

assets. DP World owns a vast amount

of real estate by way of their ports.

Logistics is very important to their

trade and Topaz is moving into logistics,

particularly with their Chevron TCO

deal, so that could have been attractive

for DP World. Topaz will also be taking

them into the Caspian, where there

are major possibilities for DP World

to do other things that they are good

at. This is a superb market and Topaz

has a strong position in Azerbaijan

and Kazakhstan, so there were those

synergies and frankly speaking we have

fantastic EBIDTA margins in Topaz and

DP World would also benefit from those.

Can you share some details of the

deal with our readers?

Talking about valuations, the value of

the deal including minorities is $1.3bn.

To make it crystal clear and totally

transparent we have taken only the net

number of $1.079bn and it has been

flagged to the market. We have agreed

and signed off with DP World and now

its down to the closing conditions which

can take two to three months to get

the various consents and fulfill other

conditions. There will be regulatory,

anti-monopoly consents which DP

World will require to obtain in the

normal course of a transaction of this

size and scale. We have called for a

Shareholders Meeting for Renaissance

on the July 29, 2019, where the deal will

be presented for approval.

Will the proceeds from the sale

reflect on Renaissance Services

balance sheet this year or in 2020?

The proceeds of the sale will be

reflected the minute we achieve

financial closure. For example, even

when we report our H1 results, which

will be announced in the next few days,

this will not be reflected as a business

but a one line item flagging the gain or

loss on the transaction.

Topaz was acquired by Renaissance

Services in 2005 and you grew it

multifold. Looking back how was

your journey with Topaz?

The journey of Topaz was a really

Samir J Fancy, Chairman, Renaissance Services shares his insights

on the $1.079bn sale of Topaz to DP World along with his future

vision for Renaissance and why the deal is a winning proposition

for all three companies. Mayank Singh reports

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