Winner: Orimix Concrete Products
“It is important not to fall in love with the company and to look at a serious offer when it comes, even though it may not have met your time horizons,” says Aamir Khan, managing director of global private equity at Bahraini investment bank Unicorn.
Given the extent to which Khan and his team became involved in Orimix, a ready-mix concrete company in Fujairah, one of the United Arab Emirates, they might have been forgiven for falling in love with it. Nevertheless, Khan admits: “We made the right call.”
That is something of an understatement. Unicorn and its Global Private Equity Fund I obtained $44.9 million for a company bought less than two years before for $17.2 million, selling in July at the peak of the Gulf building materials bubble, and just before the country’s real estate market turned down.
This return on capital of 160%, with an internal rate of return of 98%, helped Unicorn’s earnings grow by 121% to $186.7 million in the first nine months of 2008. Unicorn’s net profit grew 68% to $53.4 million in the period.
Orimix’s new owners, the listed Kuwaiti investment group Al Safat, have nevertheless been left with a company that had a dependable market share even before Unicorn bought it from a Kuwaiti family group in November 2006. Orimix’s equipment has since been upgraded by Unicorn and its workforce and management reinvigorated with a new incentive culture.
Khan’s team hand picked the management and board members of Orimix. But one of the most important ways in which Unicorn was able to double the profitability of Orimix was by successfully negotiating cheaper materials from the government cement company in Fujairah.
This deal nevertheless strictly adhered to Islamic principles: Orimix was completely unleveraged when Unicorn entered and exited the company.
“Our philosophy is to rely less on financial engineering and more on operational enhancement,” says Khan.
