Why Did ADQ Offer To Buy Aramex PJSC (DFM: ARMX)?

Kuwait January 18, 2025

I read recently that Abu Dhabi's sovereign wealth fund ADQ offered to takeover Aramex. (See for example these articles of 13th January 2025 from Reuters and The National).

Aramex is listed on the Dubai Financial Market. ADQ already owns 22.69% of Aramex's shares via its associate Abu Dhabi Ports Company PJSC. The offer was notified on Friday 10th January 2025 and was for the 77.31% of shares which ADQ did not already own. Shareholders would receive AED 3.00 per share which represented a 33% premium to the price of AED 2.25 at which the share closed on 9th January 2025. The offer document is at ADQ Offer Document

I wondered why ADQ had offered to purchase Aramex. Was Aramex very profitable? Was the investment going to provide ADQ with a substantial return?

The real reason was very different & it was well articulated in the "Intentions, plans and purpose of the Transaction" section of the offer letter:

The offer letter also contains background information on ADQ's Transport & Logistics Cluster:

So, off I went to Yahoo Finance to have a better look at ARMX and these low ratios indicated what the issue with ARMX may be:

But numbers of one company are meaningful only when compared to other companies in the industry. So, I compared Aramex with the global giants: DHL, FedEx and UPS. Of course, these three are behemoths & Aramex is far smaller in comparison. But they are in the same line of business and the comparison should provide valuable insights.

Even though ARMX's Gross Margin is higher than all three, its Profit Margin is the lowest - about a half of FDX's and a third of UPS.

And, when it comes both to Return on Assets and Return on Capital, ARMX's returns are the lowest and a third of UPS's.

These low margins and returns indicate that Aramex is in need of the "strategic and operational transformation" and ADQ's track record augurs well for the project's success.