Industry insiders have called for greater transparency in reaction to the revelation that Aabar has built up a 53 per cent stake in Arabtec, with the news appearing in Alrroya, a newspaper owned by the Dubai Government, rather than on the Dubai Financial Market (DFM).
The DFM remained silent on the issue yesterday, preferring to make unattributable comments to the effect that an official announcement was likely to be made today.
In the United Kingdom and many other developed markets, the rules state that any person or group acquiring shares worth 30 per cent or more of the voting rights of a company must make a cash offer to all other shareholders at the highest price paid in the 12 months before the offer was announced.
Such rules protect the rights of minority shareholders who might otherwise be excluded from a takeover offer.
The DFM requires any investor that acquires more than 5 per cent of the stock of a listed company to disclose their acquisition, but DFM said it does not require a group to make such a disclosure if it decides to make the acquisition through several subsidiaries.
"It's against the spirit of the law," said Sebastien Henin, a portfolio manager for the Middle East and North Africa at The National Investor. "You can't come overnight from 10 to 50 per cent like that. It's a kind of hidden transaction or hidden ownership."
Arabtec stock fell 5.8 per cent to Dh2.78 yesterday. Dealers said the price fall reflected speculation that Arabtec might delist and minority shareholders could lose out.
"If the law has not been written in a proper way to protect minority shareholders, maybe we have to rewrite the law," said Mr Henin.
Tariq Qaqish, a fund manager at Al Mal Capital in Dubai, concurred.
"We would like to see more transparency, where the exchanges have to be more actively involved in terms of disclosing vital information such as this," he said. "The disclosure was not announced to the market at the same time. The minority investors, they were definitely affected by the non-disclosure."
Fears of a delisting were heightened by the fact that Aabar delisted from the Abu Dhabi Stock Exchange in 2010 after a buyout by the International Petroleum Investment Company (Ipic), which is owned by the Government of Abu Dhabi.
Ipic initially offered to pay Dh1.45 to minority shareholders of Aabar, but raised the offer to Dh1.95 after talks with the Ministry of Economy and the Abu Dhabi Department of Economic Development.
The increased offer was considered a major victory for minority shareholders, but protection is still absent from the letter of the law.
"I don't think we are dealing with another Aabar/Ipic situation here and that's probably why retail is selling off … but I do believe that given the important news and price action over the last few trading sessions Arabtec needs to come out with clarification at this point," Haissam Arabi, the fund manager at Gulfmena Investments in Dubai told Reuters.
Mr Qaqish said it would be extremely negative for markets if it did delist. Arabtec's 84 per cent rise in value this year accounted for about half of the entire increase in the DFM General Index.
"A delisting would be really bad for the stock market. We need more companies to be listed, not less companies. The capital market is definitely an essential part of the economy."
In the absence of any official information, some brokers did not rule out a delisting.
"Everything is possible after what we have seen," said Mr Henin. "There is no obligation for them to delist the company. From the stock exchange point of view, it's not in their interest to have a delisting, so they should lobby in order to keep the company listed in the market. The more companies we have on the market, the better it is for the financial community."
He said it was difficult to predict what would happen, given how events had unfolded to date.
"It was a surprise," said Mr Henin. "If it were in Europe it would not be possible, but here it's possible.
"Look at what happened to the stock - the stock is going down because people were hoping there would be a takeover story," said Mr Henin. "People are disappointed because they were thinking that Abu Dhabi-based investors would continue to buy a stake in the company. But now the story is over. They already have a majority stake."
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