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Topaz Energy Valuation in Focus After Standard Chartered Investment

Topaz website

For proof that a rising tide doesn’t lift all boats look no further than Dubai’s Topaz Energy and Marine.

In the dark days following the global recession it scrapped a planned $500 million London IPO in 2011 that valued the company between $1.6 billion and $1.9 billion. Since then regional economies and capital markets have recovered strongly.

Fast forward to Wednesday and Standard Chartered Private Equity said it will pay $75 million for a 9.8% stake in Topaz, implying a valuation of roughly $765 million, a long way off 2011′s levels. Sure, it’s engineering unit was sold off last year, erasing some value. But regional companies obviously have become more realistic about valuations.

Topaz is a subsidiary of Oman-based Renaissance Services which is listed on the Muscat stock exchange. By issuing new shares to Standard Chartered Private Equity, it will end up diluting the parent company’s holding.

But the deal could prove beneficial in the longer term. It takes care of Topaz’ immediate capex requirements, rather than raise debt or tap its parent for more cash. And having a well-known international bank as its shareholder will only strengthen its case if and when it taps the IPO market again.

After all, isn’t that the very objective of private equity – returns.

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(via WSJ Blogs)