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Thursday, June 16, 2022
Khaleej Times - Dubai road toll operator Salik to be established as public joint stock company
The Dubai government on Wednesday announced new structure for road-toll collection operator Salik by establishing it as a public joint stock company.
In his capacity as the Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, has issued Law No. (12) of 2022 establishing Salik as a public joint stock company that will have legal, financial and administrative autonomy to carry out its activities and achieve its objectives.
Dubai Government owns all the shares of Salik Company PJSC, according to the new law.
“The Executive Council of Dubai is authorised to determine the percentage of shares that can be offered for subscription either through an initial public offering (IPO) or private placement. If the company’s shares are offered for subscription in a public offering or private placement, the Dubai government should own shares worth a minimum of 60 per cent of the company’s capital,” according to a statement issued by the Dubai Media Office on Wednesday.
99-year term granted
According to the new law, Salik Company PJSC will have a term of 99 years, starting from the date of its registration in the Trade Register.
“The term renews automatically for the same period as per the company’s articles of association. The company, which has its headquarters in Dubai, can open branches and offices in Dubai and outside the emirate,” according to Dubai Media Office statement.
The law also states that the Roads and Transport Authority (RTA) in Dubai is authorised to outsource all or part of Salik’s functions related to the operation and management of toll gates, as per the concession contract signed between RTA and Salik. The concession contract outlines the rights and obligations of each party, as well as the duration of the contract.
Pursuant to the law, proceeds from toll gates, including fees and fines, will be transferred to the company, as per the concession contract signed between RTA and Salik, the statement said.
“Existing toll gates in Dubai can be removed or modified subject to a decree issued by the Chairman of The Executive Council of Dubai. New toll gates can also be added subject to a decree issued by the Chairman of The Executive Council of Dubai, and after RTA conducts a comprehensive traffic study in coordination with Salik,” it added.
The Roads and Transport Authority launched the Salik road-toll system in 2007 to ease traffic congestion on the Sheikh Zayed highway and shore up state revenues. Salik has eight toll gates and three million registered vehicles, out of which 1.8 million are registered in Dubai.
On track for IPO,
Analysts and market experts termed the government action as a first step to list the Dubai toll-collection operator on the local bourse in line with its policy to register 10 state-owned companies on the DFM to increase the size of the stock market in the Emirate to Dh3 trillion, raise the competitiveness of bourses and encourage IPOs.
Private investment strength
Atik Munshi, managing partner, FinExpertiza UAE, said a larger number of public listed entities in any country shows the strength of private investments and their role in the economy.
“Like I had commented earlier, it is expected that more and more government and private companies would take the public listing route. The UAE being an inclusive society, it is also likely that laws are amended to facilitate more public participation irrespective of the nationality,” Munshi told Khaleej Times.
He said the UAE is one of few jurisdiction where government entities are managed efficiently and they are expected to carry their weight.
“This would indeed help such entities to adopt the corporate culture and reap positive bottom lines. It would create a big buzz and attract FDI and institution investors when flag ship UAE government companies go public,” he said.
Last week, the Tecom Group, whose 10 holdings include Dubai Internet City and Dubai Media City, announced plans to offer 12.5 per cent stake, or 625 million shares, on the DFM. The price range for the listing will be announced on June 16, the same day when the IPO subscription starts.
Good opportunity for investors
Saad Maniar, senior partner at Crowe, said it’s a great opportunity for investors to participate in the business, which has been successfully operated and managed by RTA.
“The business model where upfront cash is paid by customers, certainly has lower risk in terms of liquidity. However, investors need to study the rational of where the funds will be deployed and the prospect for growth to enable them to make smart decision,” Maniar told Khaleej Times.
“This unprecedented demand for IPOs in the Dubai is fueled by investors’ confidence in the long-term economic growth, transformation plans, and shareholders’ appetite to attain listing gains,” he said.
“Ideally, companies that demonstrate solid financial performance and implied value, have a strong equity story and a clearly defined strategy, have a leading corporate governance, have a good sense of quality management. Thus, any ‘jewel’ asset coming to market (whether government or privately owned) will draw enough demand as long as the investors are clear on the asset’s equity story,” he said.
New role defined
Pursuant to the law, Salik is exclusively authorised to operate, manage and develop the traffic toll system in Dubai. It is also responsible for implementing legislation related to toll gates and the development, operation and management of traffic systems, as per contracts signed with competent authorities both in Dubai and outside the emirate.
The company also provides advisory services related to traffic regulations and the toll gate system and works with RTA to conduct studies for planning and identifying new locations for toll gates.
“The company’s board of directors will consist of a chairman and vice-chairman, in addition to board members. The first board of directors of the company will be formed according to a decision issued by the Chairman of The Executive Council of Dubai. The board serves for a period of three years,” the statement said.
The new law permits the transfer of some staff from RTA to the new entity. The director-general and chairman of the board of executive directors of RTA will issue a decision on the staff who can be transferred to the new company without any prejudice to their rights.
The law also authorises the director-general and chairman of the board of executive directors of RTA, to nominate employees as judicial officers for recording violations of legislations the company is responsible for implementing. The law also annuls any other legislation that may contradict it. The new Law is effective from the date of its issuance and will be published in the Official Gazette.Source: