From my apartment balcony in Dubai Marina, I have for the past three years watched the slow, halting recovery of Arabtec Holding, once the pride of the Dubai construction business.
Watched, that is, in the form of the Infinity Tower, one of Arabtec’s flagship projects in the emirate. Known locally as the “twisty building”, Infinity does a 90-degree turn as it rises through its 80 floors.
Now topped out, it looks spectacular, if slightly weird – words you might use to describe the fortunes of Arabtec itself over the same period.The construction group has been through a twisting, roller coaster ride of corporate change and financial gyrations, but now looks finally to be coming out the other end.But it is a very different edifice from the one of three years ago.
Arabtec was one of the companies that grew along with Dubai, and was identified with the emirate’s achievements. From 1975, when it was founded by Riad Kamal, it built what Dubai wanted, from spectacular projects such as the Burj Al Arab and Burj Khalifa, to residential villas and infrastructure.
The fortunes of Arabtec were synonymous with the economic progress of the emirate.When the global financial crisis came in 2008, Arabtec was affected just like Dubai. It postponed or mothballed developments, and had trouble getting paid by its customers.Developments, such as the Infinity Tower, were slowed, with work progressing only when cash flow allowed. The big disappointment was the Meydan racecourse project, where work fell behind schedule as cash dried up. It ended up with another contractor taking over, and an embarrassing legal arbitration process with the Government.
Much like Dubai, Arabtec turned to Abu Dhabi.The company had always been involved in the oil and gas business there to some degree, but in 2011 there was talk of a deeper relationship with Aabar, then a quoted investment vehicle associated with the big sovereign wealth International Petroleum Investment Corporation.
The dalliance between Arabtec and Aabar was long and complicated. Delayed by Aabar’s own move to delist its shares, a union was finally, but controversially consummated last year, when Abaar emerged with 22 per cent of Arabtec’s shares.Even though, in theory, Aabar had only a minority holding in Arabtec, it began to remould the company. A new chairman, Khadem Abdulla Al Qubaisi, was appointed, and a new chief executive, Hasan Abdulla Ismaik, put in place to oversee the tranformation.In the past couple of weeks, we have seen the extent of the progress made in the revival of Arabtec. A recent presentation to investors, entitled “Capturing market growth”, was upbeat.
The industry had returned to growth, and would be back at pre-crisis levels by 2014-15; Arabtec had a Dh22 billion (US$5.98bn) “backlog”, the value of new or existing contracts; there were exciting opportunities in new sectors, especially the oil and has construction business, and in new areas, especially India.
All this expansion is to be financed by amounts to a recapitalisation of the company. Shareholders would be asked to put up some Dh4.8bn in two tranches of rights issue, and a further Dh1.7bn might also be sought in the bond markets.
That is quite a makeover. Arabtec will become an Abu Dhabi-focused contractor, with an aggressive expansion plan in regional affordable housing, some big projects such as the capital’s Louvre and airport projects, and a new strategic arm in oil and gas projects.
Business in Dubai will largely consist of work at the international airport and some villa completions, while the “positive discussions” over Meydan will continue.
It’s hard for me to imagine what the Infinity Tower will look like once it is open for business, but it will certainly be more colourful than the grey/glass edifice I can see at the moment.
Judging by market reaction – the shares have dropped since the new strategy was announced – much the same can be said of Arabtec. At present, it looks well-built and durable, but it lacks colour and detail. Potentially spectacular, but slightly weird and twisty.