France's Engie to buy 40 percent stake in UAE's Tabreed

ABU DHABI (Reuters) - Engie SA ENGIE.PA has agreed to buy a 40 percent stake in Dubai's National Central Cooling Company (Tabreed) TABR.DU and help drive the company's expansion in emerging markets such as Turkey, India and Egypt.

Engie is buying the stake for 2.8 billion dirhams ($762 million) from Abu Dhabi state investor Mubadala Investment Co, making it Tabreed’s second largest shareholder after Mubadala, which will retain 42 percent, the two companies said on Monday.

Mubadala’s stake is held in a combination of equity and mandatory convertible bonds (MCBs). Under the deal, it will convert its MCBs into shares equivalent to a 40 percent stake that will be transferred to Engie at 2.62 dirhams per share.

Shares in Tabreed, which provides cooling for buildings and other infrastructure, surged 15 percent to hit their daily limit of 2.12 dirhams at 10.48 a.m. (0748 GMT).

Reuters reported in November that Mubadala was considering the sale of a least part of its Tabreed stake.

“Tabreed is a company with a strong growth trajectory and will benefit from Engie’s experience as an operator of world-class utility businesses,” Homaid al Shimmari, deputy group chief executive of Mubadala, said in a statement, adding that Mubadala would remain a significant, long-standing shareholder.

Tabreed will become one of Engie’s main regional development platforms and the French company is expected to lead rapid growth for Tabreed in new emerging markets such as India, Egypt and Turkey, the statement said.

The two companies have also agreed certain cooperation arrangements designed to support Tabreed’s growth strategy and management team, they said.

The deal is expected to close in the third quarter of 2017.

Mubadala first invested in Tabreed in 2004 and by 2008 had put in 800 million dirhams. Then in 2009, Mubadala injected some 2.9 billion dirhams as part of Tabreed’s recapitalization.

Mubadala spokesman Brian Lott said Tabreed had returned 1.9 billion to Mubadala since 2009 through buybacks, dividends and coupons, leaving an investment of about 1.8 billion dirhams.

“With this 2.8 billion dirhams deal with Engie, Mubadala effectively made a gain of 1 billion dirhams on its investment,” he said.

Mubadala, which recently merged with fellow state fund International Petroleum Investment Co, has stakes in companies including private equity firm Carlyle and Brazilian iron-ore port terminal Porto Sudeste.

($1 = 3.6729 UAE dirham)

Editing by David Clarke