Less than a year after Aabar Investments took a major stake in Dubai's biggest contractor, Arabtec, the company has sought to reassure investors that the Abu Dhabi government-owned investment company is not planning to increase its stake.
In statement yesterday to Abu Dhabi TV reported by Wam, the state news agency, Hasan Abdulla Ismaik, Arabtec’s managing director, announced that Aabar would not increase its stake in the company beyond the 21 per cent it already holds.
“Aabar’s stake is supportive to Arabtec but they have not applied for an increase of their stake,” Mr Ismaik said yesterday. “Arabtec Holding seeks to preserve liquidity and does not want to borrow and be under burdens.”
The news came as Arabtec shares plunged to a two-month low as investors shied away from the stock following the company’s announcement last week that it would be undertaking a Dh4.8 billion (US$1.3bn) rights issue.
Unveiling fourth-quarter net profits of Dh32 million last week, Arabtec also said it was looking to raise US$450m through a convertible bond issue or other debt instruments and announced a management reshuffle with Riad Kamal resigning as chief executive.
Rumours that Aabar could try to increase its stake in Arabtec and even take the company private have been circulating since May when Aabar increased its stake in the construction giant to 21 per cent.
In response to questions from journalists, Mr Ismaik said Arabtec had no plans to delist from the Dubai Financial Market. "Arabtec will remain a publicly listed company for the foreseeable future. You can see that clearly evidenced by the company's plans to have a rights issue to raise Dh1.3 billion," he said. "The other reason why the board has chosen a rights issue to fund the new strategy is that it enables shareholders to participate in Arabtec's future growth."
He added that the company’s strategy was to increase its operations in Saudi Arabia, Kuwait, Qatar, Oman and the UAE and to expand its work in the oil and gas, power, infrastructure and affordable housing sectors.
When asked what the company was doing to reassure investors, Mr Ismaik said: “We have built up a backlog [of future orders] of Dh22bn, which gives Arabtec good visibility on future earnings. We have a new management team.
“We have announced our plans to raise capital for growth. We are very focused on the sectors and markets which present the strongest opportunities to Arabtec. We will also ensure that the market is kept fully briefed regarding our progress,” he added.
Analysts remained reticent about how they thought the management changes and new company strategy would affect it.
In a note published yesterday, the Kuwait-based investment bank NBK Capital said it was suspending its recommendation on the company in light of last week’s news that it said was likely to herald major changes in Arabtec’s management and strategy.
“In this context, we feel more clarity is needed both on the fourth-quarter 2012 results as well as on the new management’s strategy before we can adopt a reasoned opinion on the stock,” it said.
However, EFG Hermes upgraded its rating on Depa, the interior fitout firm in which Arabtec last year acquired a Dh240m stake to buy on the assumption that Arabtec’s equity raising would make a complete takeover of the smaller company more likely.
Aabar’s purchase of Arabtec shares last year provoked controversy at the time because shares in Arabtec rose 128.3 per cent during the first two months of last year as speculation of a deal circulated on trading floors while no official announcement was made until May.
Three years ago Aabar attempted to acquire a 70 per cent stake in Arabtec in a deal that would have been worth Dh6.4bn had not both parties later walked away.
[ lbarnard@thenational.ae ]
