Gulf Capital eyes 10x return from GMS

The return from Gulf Marine Services could well pay back the firm’s entire fund.

Gulf Capital may be in line for one of the biggest private equity returns in the history of the MENA region once it exits Gulf Marine Services, the offshore contractor it floated on the London Stock Exchange earlier this month.

GMS shares priced on March 14 on the LSE at 135p, valuing the business at £472 million ($783 million) and generating total proceeds of £179 million ($296 million). Gulf Capital’s shareholding reduced from 80.0% to 49.7% after the exercise of the over-allotment option, the firm said today, adding that it expects to sell down its remaining shares in the coming year following the end of its lock-up period.

At press time, GMS was trading at 158.25p, up 17 percent. That means that Gulf’s current gain – including IPO proceeds, an earlier dividend, and the unrealised value of its remaining stake at the time of the IPO – stands at more than $600 million, the firm said today. That’s almost ten times its original $62 million investment in the business in 2007.

GMS is an offshore contractor based in Abu Dhabi that has grown to become the leading operator of ‘self-elevated support vessels’ in the Middle East. Under Gulf’s ownership, it invested more than $500 million to double the size of its fleet and expanded aggressively into the North Sea, picking up clients in both the oil and gas and wind farm sectors. Gulf said today that during this seven-year period, GMS’s revenues had increased by 640 percent, an annual compound growth rate of 39.6 percent, and its EBITDA by more than 1000 percent, an annual compound growth rate of 49.2 percent.

Gulf manages around $3 billion in assets across private equity, credit and mezzanine and real estate. It is currently investing the $533 million GC Equity Partners II, a 2007-vintage. According to CEO Karim El Solh, the vehicle is about 80 percent deployed: there are seven other companies in the portfolio, and it expects to make two more investments this year. A $600 million return would pay back the entire fund, plus fees and the hurdle rate, from this one deal alone. The firm claimed that this would also exceed the multiples on other high-profile exits in the MENA region – including both control buyouts and minority investments.