Bahraini state-owned holding company takes stakes in businesses around world

Created in 2006, Bahrain Mumtalakat Holding Company owns controlling or significant stakes in many of the kingdom’s major businesses and has made strategic investments in companies in other countries. A core aspect of Mumtalakat’s portfolio revolves around managing the government’s commercial interest in many of the country’s most significant companies.

EXISTING PORTFOLIO: Gulf Air is 100% owned by the fund, and it also controls 69.38% of Alba stock, 44.18% of the National Bank of Bahrain, 36.67% of Bahrain Telecommunications Company and 37% of Gulf Aluminium Rolling Company. Mumtalakat has also invested in businesses in other parts of the world, either independently or as part of consortia. The fund focuses on a diverse range of sectors, including real estate and tourism, financial services, manufacturing, consumer and health care, logistics and telecommunications.

In 2014 and 2015 Mumtalakat made two significant foreign investments. In 2014 it took a minority stake, along with Blackstone Group and Fajr Capital, in the international education group GEMS Education, which is based in Dubai. A year later, acting with Investcorp, a Bahrain Bourse-listed $11bn alternative investment firm, Mumtalakat bought two companies in the US: PRO Unlimited, a Florida-based enterprise that provides software for companies to manage freelance contractors, and Nobel Learning, a network of 176 schools.

ALUMINIUM: While some of Mumtalakat’s investments may be motivated by a desire to broaden its portfolio and reap the rewards of investing in other parts of the world, its last major venture of 2015 was designed to bring benefits closer to home. It entered into a joint venture with Synergies Castings of India, which will hold 51% of the equity, to build a new $150m downstream aluminium factory in Bahrain. The aluminium casting and alloy wheel manufacturing plant is due to open in the final quarter of 2017 with an annual production capacity of 25,000 tonnes, equivalent to 2m wheel alloys. Synergies Castings plant at Visakhpatnam in India has a wheel-casting capacity of 960,000 and provides wheel alloys to car manufacturers including General Motors, Ford and Toyota. Mumtalakat is the majority shareholder in Alba, and the Synergies project is designed to help absorb the new supply the smelter will produce when its sixth potline opens in early 2019.

SPANISH DEAL: In March 2016 Mumtalakat acquired a 49% equity stake in Asturiana de Aleaciones ( ALEASTUR), a Spanish manufacturer of aluminium grain refiners and master alloys. Adding grain refiners to molten aluminium reduces the aluminium grain size, which allows faster casting and creates more uniformity of the structure of the alloy, while also reducing cracking during solidification. Master alloys, on the other hand, allow the quicker dissolution of alloying elements in liquid aluminium. ALEASTUR hopes to establish a centre in Bahrain as part of the deal to enable it to serve the Gulf region and markets in Asia.

COPPER: Mumtalakat also made an investment in a new industry for Bahrain, when it announced it had formed an agreement with Mueller Industries of the US and Riyadh-based Cayan Ventures to develop a $40m copper tube manufacturing plant in the kingdom, creating more than 200 new jobs. The factory will service local manufacturers of air conditioning units and refrigerators. The factory will be the first of its kind in the MENA region, which is one of the fastest-growing markets for air conditioning and refrigeration. The region has had to rely on imports of copper tubing from China. Mueller Industries will invest $5.5m in cash and hold equity of 40%, while Mumtalakat and Cayan Ventures each will have a 30% stake.

GULF CRYO: In March 2016 Mumtalakat acquired a 10% stake in Gulf Cryo, a company established in Kuwait in 1953 and a leading regional privately owned manufacturer, distributor and service provider of industrial, medical and specialist gases. The company has 30 production centres and operates in the GCC countries, as well as Jordan, Syria, Egypt, Iraq, Turkey and Austria.

US REAL ESTATE: An investment made in May 2016 was more typical of Mumtalakat’s strategy to generate income from attractive opportunities in other countries. Through a partnership with US real estate investment firm Regent Properties, it acquired a stake in a $250m property portfolio largely consisting of leased grade-A office buildings in Phoenix, Arizona and Dallas, Texas. Existing investors in Regent Properties include Black Rock and CAM Capital. Mumtalakat said the deal conformed to its strategy of forming partnerships with reputable international businesses looking for growth capital and with a long-term investment horizon.

CLEAN WATER: In August 2016 Mumtalakat took what it described as a significant stake in a company that has gained an international reputation for its water purification and waste treatment solutions. The acquisition of UK-based Envirogen was completed alongside Gecos Invest and Hermes GPE Environmental Innovation Fund through a joint investment syndicate led by Promethean UK Opportunities Fund II. Envirogen is a provider of technology for the treatment of water, waste water and vapour emissions with operations in Europe and North America. However, the company hopes to expand its operations into the GCC where it sees growing demand for effective water treatment solutions.

ITALIAN HEALTH: In the same month Mumtalakat announced it had made its first investment in Italy, buying a stake in KOS, the country’s fourth-largest private health provider by revenues. Mumtalakat’s involvement in KOS is through its second-largest shareholder F2i Healthcare, and as a result of the deal, the latter bought 3.2% of the equity in the company for €20m, taking F2i’s stake in the firm to 40.47%. KOS has 76 facilities in Italy, as well as businesses in the UK and India.

FOOD SECTOR: The performance of some of the local food sector companies in which Mumtalakat has equity was adversely affected by government measures in 2016. Subsidy cuts on fuel, utilities and food are having an impact on Mumtalakat’s investments. The fund has a 15% share in Delmon Poultry Company, which is listed on the Bahrain Bourse. In the first half of 2016 Delmon Poultry recorded a BD682,000 ($1.8m) loss compared to a profit of BD760,000 ($2m) in the same period in the previous year. The drop was precipitated by the removal of BD1m ($2.7m) in government subsidies between the two periods. Meanwhile, flour producers were still receiving a subsidy in 2016, and as a result, Bahrain Flour Mills, a listed company in which Mumtalakat has a 65.73% stake, made a profit of BD103,000 ($272,000) after an operating loss of BD1.55m ($4.1m) was cancelled out by a subsidy of BD1.9m ($5m).

Mumtalakat also has a 27.48% stake in Bahrain Livestock Company (BLSC), with Trafco Group holding 36.3%. In its 2015 annual report Trafco reported that following the removal of the meat subsidy on October 1, 2015, BLSC was forced to sell its remaining supply of fresh meat at below cost price. The company reported it had switched focus to chilled and frozen meat and is redefining its strategy in light of new challenges, with the hope of achieving profits in the coming year.