UAE utility firm Utico close to investing $295m in Hyflux for 88% stake

Source: Hyflux headquarters in Singapore. (Photo by Mayuko Tani, Nikkei Asian Review)

Beleaguered water treatment company Hyflux and UAE-headquartered Utico are working towards the completion of a deal that could see the latter invest as much as S$400 million in the Singapore-based company, according to a joint statement issued on Thursday.

To break down the numbers further, if the deal fructifies, Utico will invest S$300 million ($221.32 million) in Hyflux in lieu of an 88 per cent stake, and will pump in another S$100 million ($73.77 million) in the company as a shareholder loan.

The transaction is currently pending stakeholders’ approvals.

Utico, the largest private full-service utility and developer in West Asia, is one of seven potential investors of Hyflux. It had earlier extended the deadline for signing a binding agreement with embattled Singapore company to June 27.

Utico’s shareholders and investors include the governments of Oman, Saudi Arabia, Bahrain, and Brunei.

In the latest filing, Utico informed Hyflux of its intent to offer cash equivalent to a 4 per cent stake in the enlarged Utico group plus additional cash to the holders of preference and perpetual securities (PNP).  Besides, it also reiterated its plan to enter into a definitive documentation in respect of the proposed investment at the earliest and to hold town hall meetings in the coming weeks for both PNP holders and the holders of the medium-term notes (MTN) before the next court hearing scheduled on August 02, 2019.

Additional details of the proposed investment will be announced prior to the townhall.

The UAE firm had previously said in June that “small investors of up to S$2,000 to S$3,000 could get 50 per cent cash redemption along with full redemption opportunity while the rest of the investors could get a similar but staggered and cascade deal.”

Utico had approached Hyflux in April-May with a non-binding letter of intent (LOI) for an investment in the company through a court-supervised reorganisation process. While the original deadline for the completing the binding agreement ended on June 27,  there have been ongoing informal discussions between Utico and Hyflux wherein the former met representatives of various stakeholders of Hyflux to discuss the proposed investment for an agreement.

A slew of investors have evinced interest in Hyflux’s assets. An unnamed Chinese power service provider is understood to have signed a non-binding LOI with Hyflux in June. Alongside, Mauritius-based investment fund Oyster Bay Fund is also said to be in advanced talks with Hyflux on a binding agreement for up to S$500 million ($368.87 million). There is also a large desalination company, which had issued a letter of interest for certain assets owned by Hyflux in Algeria, Oman, the Middle East and Africa.

In addition, four more companies are also in discussions for a potential investment. One of them is a large unnamed power sector player in Asia that is keen on merging with the Hyflux group; while the second is a fund whose corporate strategy includes undertaking corporate turnarounds for distressed firms. Besides, an Asia-based nuclear and civil engineering contractor; and a waste treatment player are also in the race for a proposed investment.