Engie-backed National Central Cooling, commonly known as Tabreed, along with private equity firm CVC, is currently in exclusive discussions to acquire the district cooling business of Abu Dhabi-based Multiply Group. This deal is anticipated to value the unit at over $1 billion, as reported by two sources familiar with the negotiations.

According to one of the sources, the bid for Multiply Group’s cooling unit, PAL Cooling Holding (PCH), is close to $1.1 billion. Following the news of these talks, Tabreed’s shares experienced a 4.3% increase, rising to 2.68 dirhams ($0.7297) during midday trading.

The interest from Tabreed and CVC in PCH illustrates a growing trend among international buyout firms looking to invest in the Gulf region, driven by regional governments aiming to diversify their economies away from oil dependency. Tabreed issued a statement saying it does not comment on market rumors or speculation but would disclose any material transactions to the market once finalized.

CVC declined to provide any comments, and Multiply Group did not respond immediately to requests for input. Earlier reports from Reuters indicated that CVC was collaborating with Tabreed to submit a joint bid for PCH.

District cooling plants, which supply chilled water through insulated pipes to cool various buildings, are regarded as a more economical and environmentally friendly alternative to traditional air conditioning systems. These plants are particularly favored in the UAE and throughout the Arabian Peninsula, where summer temperatures can exceed 50 degrees Celsius (122 degrees Fahrenheit).

Founded in 2006, PCH operates several cooling plants in Abu Dhabi, boasting a total design capacity of 242 000 refrigeration tonnes, as stated on its website. Previous reports indicated that the sale had attracted interest from other bidders, including KKR, I Squared Capital, Investcorp, and TAQA, and was expected to yield around $1 billion.

Multiply Group is under the control of International Holding Company (IHC), whose chairman is Sheikh Tahnoon bin Zayed Al Nahyan, the UAE’s national security adviser and a brother of the country’s president. IHC oversees a vast business empire that includes two sovereign wealth funds.

($1 = 3.6727 UAE dirham)