Dubai shipping firm Gulf Navigation finally clears hurdle to buyout Brooge Energy assets

Dubai: The Dubai shipping firm Gulf Navigation has ticked off one major milestone in its ongoing turnaround by getting shareholder approval to take over the assets and companies owned by Brooge Energy Ltd. The value of the deal is pegged at Dh3.2 billion.

The takeover plan was announced back in October 2023 but has taken time to go through the many processes before it was finally cleared by Gulf Navigation’s shareholders.

A Cayman Islands based entity, Brooge is into crude oil storage and related services. One of its subsidiaries – Brooge Petroleum and Gas Investment Company – is based out of the Fujairah Port.

Gulf Navigation will take over this entity as well as Brooge Petroleum and Gas Investment Company Phase III FZE and BPGIC Phase 3 Ltd..

“The transaction is expected to significantly enhance Gulf Navigation’s operational capabilities and market position, solidifying its presence in the midstream oil and gas and logistics sectors,” said a statement.

What happens next
Gulf Navigation’s Board of Directors has been authorized to take ‘all necessary actions’ to finalize the Brooge Energy deal. This includes completing regulatory approvals, amending the Articles of Association, and overseeing capital increase procedures.

The transaction is expected to be completed within the second quarter of this year, subject to regulatory approvals and customary closing conditions.

Structuring the Brooge buyout
The acquisition will be settled through a combination of cash, newly issued shares, and Mandatory Convertible Bonds (MCBs).

Issuance of 358.84 million new shares to Brooge Energy Ltd. at Dh1.25 per share, with a one-year lock-up period.

Issuance of MCBs of Dh2.33 billion to BEL, convertible at Dh1.25 per share, with a one-year lock-up period post-conversion.

Issuance of MCBs of Dh500 million at AED 1.10 per share, ‘exclusively allocated’ to existing Gulf Navigation shareholders, with major shareholders subscribing to any remaining bonds not taken up by minority investors. (These MCBs are to be converted into shares within three months.)

A cash payment of Dh460 million as part of the transaction settlement.

For the Dubai shipping company, the deal is the route to make it a ‘dominant player in the energy sector by expanding its storage and logistics capabilities’.

BEL’s assets includes facilities for the storage of fuel oil, crude oil, and petroleum products, and ‘will complement Gulfnav’s existing operations’.

According to Ahmad Kilani, CEO of Gulf Navigation, ” This deal reinforces our commitment to sustainable growth, operational excellence, and long-term value creation for our shareholders. With this acquisition, we strengthen our position in the midstream sector, expand our service portfolio, and unlock new revenue opportunities.”

The company has plans to expand its storage and logistics capabilities, ‘enhancing its ability to serve the growing demand for midstream oil and gas services in the region’.

“Financially, the deal is projected to enhance Gulfnav’s revenue streams and improve EBITDA margins over the next few years,” said Kilani. “The issuance of new shares and MCBs will increase Gulfnav’s share capital by approximately 320%.”