Analysis Finance & Banking Canada and Dubai grow closer with every deal struck By Melissa Hancock June 7, 2022 Creative Commons Sultan Ahmed Bin Sulayem, group chairman and chief executive of DP World DP World’s total debt stood at $19,080 million at the end of 2021 Bilateral trade increased by 24 percent last year, reaching $2.5 billion A Canadian pension fund company’s decision to invest $5 billion in UAE multinational logistics company DP World’s assets is a striking example of the deepening commercial ties between the two countries. Caisse de Depot et Placement du Quebec’s (CPDQ) announced the deal on Monday. It will see CPDQ take a 22 percent stake in DP World’s prized assets in Dubai – Jebel Ali Port, Jebel Ali Free Zone and the National Industries Park. CPDQ, a Montreal-based pension fund will invest $2.5 billion through a new joint venture, with the remainder of the transaction being financed by debt; the transaction implies a total enterprise value of about $23 billion for the three assets. CPDQ to invest $5bn in DP World as it looks to reduce debt “Caisse de dépôt et placement du Québec’s investment is one of the first times a strategic foreign investor has invested in such a critical piece of infrastructure,” Wesley Schwalje, COO at Tahseen Consulting, a Mena-focused public sector strategy and public relations firm, told AGBI. “The deal is also significant in that it includes an interest in the Jebel Ali Freezone and National Industries Park freezones.” Indeed, the assets that DP World is relinquishing its control over have served as key engines of Dubai’s growth and have become household names in recent decades. The company has been open about the fact that it is looking at ways to reduce its debt pile; DP World’s total debt stood at $19,080 million as of December 31, 2021. The transaction “achieves our objective of reducing DP World’s net leverage” to below four times net debt to Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA), Sultan Ahmed Bin Sulayem, group chairman and chief executive of DP World, said in a statement released on Monday. The deal makes good strategic sense for both sides in terms of their objectives. “While the deal will help CDPQ diversify its investments in the zone of Middle East, Africa and South Asia that are growing logistics markets and strategic in nature, it will help DP World reduce its debt burden for expansionary plans,” said Raghu Mandagolathur, CEO of Marmore Mena Intelligence. “CDPQ’s investment will deepen the existing relationship between CDPQ and DP World.” CDPQ and DP World already own a global ports and terminals platform which was launched in December 2016 and has since invested in port terminals globally and across various stages of the asset life cycle. DP World holds 55 percent share of the platform and CDPQ the remaining 45 percent stake. “The DP World and CDPQ co-investments have been very successful thanks to our complementary expertise and long-term investment horizon,” said Bin Sulayem. “We believe this new partnership will enhance our assets and allow us to capture the significant growth potential of the wider region.” With CDPQ’s latest investment, the partnership between CDPQ and DP World now spans four continents and 18 terminals. Canada and the UAE have been steadily deepening bilateral trade and investment over recent years, including making progress towards a Canada-UAE Foreign Investment Promotion and Agreement. Bilateral trade increased by 24 percent last year, reaching a new height of $2.5 billion. Today, the UAE ranks as Canada’s top export market in the MENA region while the UAE is Canada’s 15th largest foreign direct investor in the country. Notably, in recent months, the two countries have announced partnerships between Abu Dhabi sovereign wealth fund Mubadala and the Ontario Teachers’ Pension Plan as well as Brookfield and the First Abu Dhabi Bank. Industry professionals say the latest deal struck between CDPQ and DP World could be a sign of more to come. “This deal foreshadows a push to attract strategic investors to Dubai’s non-Tecom owned freezones,” Schwalje said. “Between this deal and the upcoming Tecom IPO, Dubai seeking strategic foreign institutional and sovereign investors to invest in critical assets is a timely move in its economic co-dependence soft power playbook. “It wouldn’t be surprising to see CDPQ also eyeing the Tecom and Salik IPOs as well as future opportunities to invest in Dubai’s aviation infrastructure.” In March this year, the Canada-UAE Business Council approved its newly set policy agenda and programmes for 2022 in line with the UAE’s net zero commitment, the country’s National Food Security Strategy 2051, and the “Projects of the 50” strategic plan – a series of projects that aim to accelerate the country’s economy over the next 50 years.