Investment Holding Group mulls acquiring Elegancia

Satyendra Pathak Doha Qatar’s Investment Holding Group (IHG) has announced that Elegancia Group Holding has submitted a proposal to be acquired by IHG, t...

Satyendra Pathak Doha Qatar’s Investment Holding Group (IHG) has announced that Elegancia Group Holding has submitted a proposal to be acquired by IHG, through an exchange of shares transaction.IHG’s board of directors has initially approved the acquisition, pending a detailed study, the company said in a disclosure on the Qatar Stock Exchange. Elegancia Group Holding employs more than 20,000 employees. It is currently developing two hospitals in Qatar. Elegancia’s portfolio includes several companies in Qatar that operate in the sectors like healthcare services, general services, industrial and contracting.IHG board of directors (BoD) has discussed the proposal and initially approved it subject to a detailed study of the financial, legal, administrative and technical aspects of the target company. Once the study is finalised, it will be presented to IGRD’s EGM for potential shareholders’ approval.Commenting on the proposed acquisition in a company report released on Thursday, QNB Financial Services (QNBFS) said, “The announcement by Investment Holding Group (IHG) that Elegancia Group Holding has submitted a proposal to be acquired by IHC through a share swap could be a sustainable growth driver for IHG.” “We maintain our accumulate rating on IHG. However, we will revise our estimates and target price (TP) once details on the acquisition, share swap rate are released. As the deal is likely to be structured as a share swap, we do not think IHG will be required to raise new debt to finance the acquisition. This will be different from IHG’s CESCO minority stake buy-out in 2018 and should be perceived as positive by current IHG investors,” QNBFS said in the report. On the other hand, QNBFS said, “Elegancia’s financials, growth prospects, and ultimately the share swap ratio for the deal will be the major catalysts for our new forecasts and TP going forward. Apart from its businesses in the construction supply chain, which should complement IHG’s contracting arm, Elegancia also has less-cyclical businesses such as two upcoming hospitals, International Healthcare Center and the View Hospital with 250 beds to be opened in 2022. Elegancia’s healthcare exposure might contribute notably to IGRD both in terms of profitability and diversification away from the contracting business.”“We continue to like IHG as a turnaround story. Since its IPO, IHG has been going through a comprehensive restructuring process. The goal of this restructuring is to shift from an investment company to a private equity structure with full management focus on IHG’s subsidiaries,” it said. In order to achieve that, the report said, “IHG has had notable shifts in its BoD and top management ranks in recent years. The new management appointed after the IPO and the BoD are highly involved in its subsidiaries, especially in terms of business generation and cost management.” “On one hand, the new management is engaged in expanding the product range of the supplies and trading segment with high margin products, it is also continuously evaluating cost-cutting opportunities, especially in terms of labour force rationalisation and rental cost reduction,” it said.“As a result, IHG’s G&A declined to QR55 million after adjusted for the one-offs in 2020 from QR75.7 million in 2018. On the M&A front, in the fourth quarter of 2018, IHG purchased the remaining 39.6 percent minority stake in CESCO at QR193.5 million, increasing its stake to 100 percent,” the report said.The prospective acquisition of Elegancia is likely to be another step taken by the management to ensure the long-term growth and profitability of the company, QNBFS said. IHG, a diversified group that specialises in construction and contracting, reported a 2020 net profit of QR27.1 million, half of what it posted in 2019.