Al Jazeera Steel has announced that its major shareholder, Global Buyout Fund LP (wholly owned subsidiary of Global Investment House, Kuwait), has divested its entire 51% stake (composed of 63.7mn shares) to a local business house, Suhail Bahwan Group, for a total consideration of cOMR16mn (OMR0.251/share), which it acquired during FY07. The transaction valued the shares at a 25% discount to the current market price and slightly below our TP of OMR0.26/share. Suhail Bahwan Group is a multi-billion dollar Oman corporate house, with over 40 companies across the MENA and South Asian regions, and spans multiple verticals, including automobiles, EPC contracting and healthcare. 
 
Our view: We do not expect the change in shareholder to have an immediate impact on the management of the company nor on its operations, but we view it positively over the long term, given the strong profile of the new ownership, which should help expand the company’s market presence. Given that the transaction value implies a significant discount to the current market price, we expect the stock is likely to come under some selling pressure in the short term. It is not clear why the company was sold at such a large discount, but it could be that: i) it is a reflection of the earnings volatility expected in the business over the medium to long term, being a commodity business and in highly challenging markets (in line with our view); or ii) the selling shareholder needed to divest the company quickly to meet its fund objectives or improve its liquidity position.
 
Jazeera Steel: OMR0.34 as of 25 Mar. 2018, Rating: Neutral, TP: OMR0.26/share, MCap: USD111mn, ATMI OM/ATMI.OM
Sameer Kattiparambil