by Tamara Walid on Sunday, 13 April 2008

 

Dubai International Capital executive chairman and CEO Sameer Al Ansari tells Tamara Walid why he hasn’t given up on Liverpool, and where the US$13bn buyout firm will spend its war chest in 2008.

Sameer Al Ansari looks remarkably calm for a Liverpool fan on the eve of the Champions League clash with Arsenal.

Cash is king at the moment. Banks are not lending and private equity is not investing.

The 45 year-old CEO of Dubai International Capital is in the unique position of being both fan and potential owner of the UK Premier League football club after pursuing a deal with current owners George Gillett Jnr and Tom Hicks, which for the time being at least is on hold while the pair resolve their differences.

In the meantime Al Ansari says his biggest footballing challenge is trying to beat his kids at FIFA 2007 on Playstation. Then it’s back to business.

The UK-qualified former chartered accountant insists there’s much more to the company’s acquisition ambitions than the beautiful game as it seeks to slow down its buying activity and instead concentrate on expanding the businesses it already owns, including the Travelodge budget hotel group and Alliance Medical.

At the same time, DIC will target investments in the aeronautical and power sectors.

“The challenges last year were doing the right deals. The challenge this year is finding the right deals and executing them in a very difficult environment,” he says, pointing to the task of arranging buyouts amid “the worst financial crisis in 60 years.”

State-owned Dubai International Capital, which manages US$13bn, made headlines last year as it acquired substantial stakes in some of the world’s biggest corporate names, among them Sony Corp, HSBC Holdings and the European Aeronautic Defence and Space Company known as EADS NV.

This year is a different story. There will be deals, Al Ansari tells us, but not as many.

“We are heading into a recession. We have rising inflation, very high oil and commodity prices, and low interest rates that are almost gone now,” he says, adding that the liquidity crunch and accompanying strains on the global banking system make for a “perfect storm”.

“So how do you manage that situation and turn things around?” asks Al Ansari.

Lowering interest rates to simply encourage borrowing is not the answer, he says.

With the lack of liquidity in the system, banks are unable to lend and so even if interest rates are reduced, the economy still suffers.

We have more disclosure than most companies in this part of the world. We are clear about our strategy and motives.

In such volatile times, Al Ansari is concentrating on playing a careful game. Protecting and growing DIC’s existing portfolio while exercising caution when it comes to new acquisitions.

“Everybody is talking about how things are getting really cheap. Yes, they are cheaper than they were before. But can they get cheaper still?” says Al Ansari.

Does Virgin look cheap? He bats away last week’s UK press reports that DIC was in discussions with Virgin Group about providing possible investment support.

“We are not in discussions with Virgin so whatever is in the press is just speculation,” says Al Ansari.

While Virgin may not be in talks with DIC, Al Ansari says that he expects an increasing number of corporates in the US and Europe to look to this part of the world to raise funds.

“Cash is king at the moment,” he says. “Banks are not lending and private equity is not investing.” It is clear he is talking about “other” private equity rather than DIC.

Al Ansari believes US equity markets have not yet bottomed out and things could get much worse before they get better.

“We don’t run a portfolio of 100 or 200 companies that we manage on a daily basis; we prefer to take large strategic stakes in carefully selected companies. We’ve got to do our homework and time things right.

“I just feel, given the state of the banking system, to pull out of recession is going to be quite difficult.”

He says he hopes that the US government is starting to realise that cutting interest rates will not in itself solve the issue.

“They know that they need to pump liquidity into the system. Does it need US$100bn or US$2 trillion, that’s really the 10 trillion dollar question! No one really knows at this stage and that’s the scary thing. You cannot invest in a void.

“And that’s why we haven’t made big investments so far this year because there are still too many unanswered questions. But things will get cheaper and there will be great opportunities.”

Those opportunities may include the investment banking sector. He says DIC has been keeping a close watch on banks even if valuations are not yet tempting enough for the group to invest.

“Although things look cheap, compared to six months or a year ago, they still could get worse”.

The global buyout business faces similar uncertainties. “It is difficult to do leverage buyouts without the leverage”.

However he believes that this region has not been impacted to the same extent as Europe and the US. That said, he concedes it has become a much bigger challenge to close larger deals.

Al Ansari forecasts an improvement in the leverage buyout market but not before the second half of 2008.

“We’re focusing there [leverage buyouts] much more on growing our existing portfolio of companies so that the Doncasters of this world will continue to look at opportunities to grow,” he says.

DIC acquired UK engineering group Doncasters in 2005 for US$1.38bn.

It was bought from the private equity arm of Royal Bank of Scotland.

The same year, DIC picked up the waxworks and leisure group Tussauds for US$1.57bn.

Two industries that are likely to attract increasing interest from the private equity house in 2008 are aerospace and power.

“There are more and more power stations being built – more power, more gas. That sector will continue to grow very strongly,” says Al Ansari.

Of the group’s existing investments, Al Ansari sees significant growth potential for its Travelodge business, the second biggest budget hotels operator in the UK after Premier Inn, which it acquired in 2006 from Permira.

“Travelodge is growing very fast in the UK. That’s a great model that we can roll out in other parts of the world so we are looking for opportunities in India, China, and other parts of the world to grow much more aggressively our existing assets,” he says.

DIC acquired Alliance Medical in November 2007 for US$1.18bn which operates mainly in the UK and Italy.

Al Ansari reveals plans for growing the company’s model into Eastern Europe.

“The focus is on growing the existing assets rather than doing more buyouts in the current environment,” he says.

Currently, DIC has identified a list of 20 to 30 companies that it keeps a watchful eye on.

“Within that [our investment pipeline] there are three that we absolutely love at the moment and we will probably start triggering one of those as soon as we feel things are beginning to stabilise,” he says.

Media fascination with Dubai’s global buying spree has meant that DIC is often described as a sovereign wealth fund rather than a private equity house.

Al Ansari doesn’t like the description – perhaps understandably given the hostility shown towards such funds by both politicians and market regulators in Europe and the US in recent months.

“As I say to people who ask me this question, ‘just go to our website’,” he sighs.

“We have more disclosure than most companies in this part of the world. We are clear about our strategy and motives; we communicate and talk about our deals including our exits.”

“The only thing we don’t do is disclose our financials, as we are a private company,” he adds.

For the time being, control over his beloved Liverpool seems just beyond Al Ansari’s grasp.

Nevertheless, you get the feeling that he is happy to take that particular game into extra time.

In the meantime, he will be happy to take a 4-2 victory over Arsenal and a place in the Champion’s League semifinal as adequate compensation. Game on.


Liverpool FC: The full story

Al Ansari prefers watching Liverpool on the pitch to talking to reporters about whether or not DIC will buy the club.

After a difficult struggle to take over the club, the CEO of DIC seems to have had enough of a “very difficult and complicated situation”.
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“You have two partners who do not see eye to eye. And we decided that we pull out completely. Let them sort out their problems,” he says.

DIC was prepared to pay US$788.5m for the club, which was bought by its two owners, George Gillett Jr and Tom Hicks, for US$431.7m. However they were unable to reach a deal with the Dubai-based company when Hicks refused to sell his 50% stake or even a minority stake.

Al Ansari, who is one of the club’s biggest fans, was hoping to join the board once the acquisition was completed and had ambitious plans to raise its profile.

“We will continue to be interested, would love to own the club but we are not going to put ourselves in a difficult situation where we make the investment but we have no control over the destiny of the club and we cannot influence the success of the club,” says Al Ansari.

“Getting involved will mean doing it for the right reasons with a set goal in mind to make it a huge success, he adds.

“Unfortunately, the terms that have been put on the table do not allow us to do that.”

Despite being fraught with risk, there’s big business in English football. “I don’t think there is a bigger business in the whole world than football,” says Al Ansari, pointing to the global appeal of the game.

However, Al Ansari admits that profit is not what necessarily attracts investors to put their money into football. “In general, most owners of football clubs make those investments because they are passionate about football, because they want to own a football club.”

In Liverpool, Al Ansari found both a good investment and a deal he’s passionate about, but reveals: “Even if I wasn’t a Liverpool supporter I would still put Liverpool to my investment committee as a great investment opportunity.”

He sees the valuation as being attractive when compared with Premier League rivals like Arsenal and Manchester United, adding that the brand, history, and success of Liverpool are exactly what attracted him to the club.

 

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