What a difference a week can make. Arabtec Holding shares have risen more than 15 per cent in the past week as the largest contractor in the UAE was seen to be one of the main beneficiaries of the Dubai Government's support for Dubai World. And the company said yesterday that a subsidiary, Target Engineering, had picked up two new contracts in Abu Dhabi worth a total of Dh835 million. That momentum has led some analysts to wonder whether Arabtec's proposed merger with Aabar Investments still makes sense, as it was conceived as a solution to Arabtec's liquidity issues. Aabar, based in Abu Dhabi, announced a proposal in January to buy a 70 per cent stake in Arabtec for US$1.7 billion (Dh6.24bn).
But the news last week that the Dubai World-owned Nakheel, for which Arabtec was building 1,500 villas at Al Furjan, would use some of its $8bn injection to settle outstanding bills with contractors appears to lessen Arabtec's need for cash. Arabtec's shares climbed sharply on Sunday after Al Mal Capital upgraded the contractor to "outperform" from "market perform" following Nakheel's announcement. In a research note, Al Mal said the "bailout" made Arabtec more attractive as a stand-alone entity.
It said that because the Aabar deal was potentially dilutive, "Arabtec shareholders will now no longer find it attractive". Whether or not the deal goes ahead, however, will ultimately be up to shareholders. Once the companies complete due diligence, with an April 16 deadline, the deal would require support from 75 per cent of shareholders. There were mixed messages at Arabtec's annual meeting on Saturday. Board member Sheikh Sultan bin Saqer Al Qassimi said: "When the deal is completed, if at that time we continue to be positive, then it will be up to shareholders to decide if we need Aabar's money."
But Riad Kamal, the chief executive and founder of Arabtec, was insistent that the value of shareholder investment would stay the same. "It [the deal] just generates liquidity for the company," Mr Kamal said. firstname.lastname@example.org