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Leighton Holdings, Australia's biggest builder, agreed to pay A$870 million ($1 billion) for a stake in Dubai-based Al Habtoor Engineering, increasing its role in one of the world's fastest-growing real estate markets.
Leighton's shares, which have more than doubled this year, rose by the most since February after the Sydney-based company said it will use cash and debt to buy 45 per cent of Al Habtoor Engineering, boosting revenue by A$800 million in fiscal 2008.
Chief executive officer Wal King is expanding in the Persian Gulf region amid growth in demand for the company's construction and engineering services. The United Arab Emirates is home to some US$220 billion ($313 billion) construction projects, more than any other Persian Gulf state, as the country uses record oil revenue to diversify the economy by building hotels, airports and factories.
"It's very good business in Dubai for construction companies like Leighton," said Angus Gluskie, who helps manage the equivalent of about US$380 million, including Leighton shares, at White Funds Management in Sydney. "Customers there place a high priority on getting the job done quickly, so a company like Leighton, with a strong track record of delivery, can expect to get higher margins in Dubai."
Leighton gains the opportunity to join Al Habtoor on the US$3.6 billion upgrade to Dubai International Airport, little more than two years after setting up a unit in the Persian Gulf. The developer's projects in the region include a US$550 million highway in Abu Dhabi and the A$557 million contract to build the Al-Shaqab Equestrian centre in Qatar, a sheikhdom less than 60km west of the UAE.
In May, the company agreed to set up a venture worth as much as US$2.5 billion with Dubai-based Emaar Properties JSC to carry out developments in India.
Leighton shares surged 7.8 per cent to a record A$47.25 yesterday in Sydney, the biggest advance since February 14.
Founded in 1970, Al Habtoor is run by Khalaf Ahmed Al Habtoor, ranked 369 on Forbes magazine's Rich List this year. Al Habtoor's construction unit built the Middle East's tallest hotel, the Burj Al Arab in Dubai, and has contracts to build international terminals at Dubai and Abu Dhabi airports.
The group also owns six hotels and has an automotive unit that sells Bentley, Aston Martin and Mitsubishi vehicles.
Forbes put its owner's net worth at US$2.5 billion, making him the equal third-richest man in the United Arab Emirates.
Abu Dhabi Commercial Bank, HSBC Holdings, Mashreqbank PSC and the Australian Government's Export Finance and Insurance provided Leighton with A$520 million in debt funding for the deal.
Leighton is 55 per cent owned by Hochtief AG, Germany's largest builder.
-Bloomberg
