Aabar Investments, the Abu Dhabi firm that last year took a major stake in the championship-winning Brawn GP Formula One team last year, said today it will acquire 70 per cent of Arabtec, the Dubai-based construction giant, in a deal worth Dh6.4 billion. The deal is the latest in a string of major acquisitions that have seen Aabar spend at least Dh25 billion (US$6.8bn) on stakes in the German car maker Daimler, the UK aerospace firm Virgin Galactic and 30 per cent of Brawn GP last November. The Dubai-based Arabtec, the Middle East's largest listed construction firm, has worked on a long list of major projects in the region, including the recently-inaugurated Burj Khalifa.
Aabar's headline-grabbing deals have come one after the other since the International Petroleum Investment Company (IPIC) of Abu Dhabi took a 70 per cent stake in Aabar, which had begun as a small energy firm, in mid-2008. Those deals have transformed Aabar into a major investment vehicle of the Abu Dhabi Government. The Arabtec deal has been given the go-ahead by both Aabar's and Arabtec's boards of directors, but awaits final approval from Arabtec shareholders and Government regulators. Mohamed Badawy al Husseiny, Aabar's chief executive, told The National: "Clearly we invest into different sectors, and the sectors we invest in include and are not limited to real estate. Investing in a company like Arabtec could provide very good synergies given the portfolio of assets we have now and could have in the future."
Among Aabar's property investments to date are two plots in the Al Raha area outside Abu Dhabi island it bought in November of 2008 for Dh500m, where the company plans to develop up to four residential towers. The company has also bought 12 towers on six lots on Reem Island in Abu Dhabi for Dh5bn last February, and 14 additional plots in Abu Dhabi last year for Dh2.7bn. Aabar issued a statement on January 3 denying it had made an investment in Arabtec after rumours spread that it was going to buy a stake in the construction giant. Shares in Arabtec and Aabar, which is listed in Abu Dhabi, shot up after the rumours spread. Arabtec shares closed on Thursday at Dh2.89. Mr al Husseiny said the Arabtec investment was a "big deal" and a sign that the company was on the hunt for additional investments that would benefit shareholders. He declined to elaborate on future property-related deals or co-investments with Arabtec once the transaction is complete. He said, however, that Aabar had benefited from seeing deals that come to IPIC.
"We've invested of course in Daimler, and together we've made a co-investment in [the electric car maker] Tesla Motors, and with Daimler we invested in the Formula One Brawn team," Mr al Husseiny said. "Obviously in a portfolio of investments you provide synergies if you can." The acquisition of 70 per cent of Arabtec, which has its shares listed on the Dubai Financial Market, would come through a bond issued by Arabtec to Aabar that would mandatorily convert to new Arabtec shares at maturity, Mr al Husseiny said. He declined to provide details on the timing of the conversion. "We like to do stuff step by step, and we've been fortunate to have been able to be involved in good deals," Mr al Husseiny said. "Our chairman, Khadem al Qubaisi, has been extremely active and with his leadership we've been lucky to look at tremendous opportunities."
Credit Suisse said in a note today that the deal could help shield Arabtec from problems facing the construction industry in Dubai, where property prices are estimated to have declined by as much as half last year. The investment "hedges the company against any shortfall in working capital resulting from potential default on payments from Dubai clients," Credit Suisse said. The investment bank said 75 per cent of Arabtec's shareholders would have to approve the deal in an extraordinary general meeting for it to go through email@example.com