Aabar signals market exit

The Abu Dhabi Government-owned firm's plans to delist surprises investors.

Aabar Investments owns a 9.1 per cent in Daimler, the maker of the Mercedes-Benz cars.

Aabar Investments, one of Abu Dhabi's highest-profile Government investment vehicles, is considering a plan to go private. In an announcement yesterday on the website of the Abu Dhabi Securities Exchange (ADX), Aabar said it was calling a meeting of the board of directors on Thursday to consider converting to a private company and "cancelling the listing of the company and its shares".

The news came as a shock to analysts and investors who have followed the company since November 2005, when it became the region's first oil and gas outfit to make a public offering. The company then underwent a startling transformation into a government investment entity that is now the largest single shareholder in the German car maker Daimler. "Without clearly hearing from the company as to what the motives are, we're speculating about what the rationale might be," said Ali Khan, the managing director at Arqaam Capital in Dubai.

"But maybe they think it's better given their model of funding." Aabar is about 70 per cent owned by the International Petroleum Investment Company (IPIC), which is wholly owned by the Abu Dhabi Government. As Aabar's controlling shareholder, IPIC has pumped billions of dirhams into the company in recent years to fund its acquisitions. Aabar executives and representatives could not be reached for comment yesterday, and the mechanics of the proposed de-listing remained unclear. Representatives of the stock exchange did not respond to requests for comment. It is not known whether or how minority shareholders in the company will be compensated if the plan goes through.

Akram Annous, a deputy fund manager at Al Mal Capital in Dubai, said that while the announcement was unexpected, going private made sense for Aabar because of the difference in interests between IPIC, which wants the company to use its cash to expand, and minority shareholders, who want Aabar to return some of its profits as dividends. "From an official company standpoint, this is a surprise," Mr Annous said. "They have never hinted that this was an option they were considering. However, if I was in their shoes, this is exactly what I'd be doing ? Aabar has some longer term strategic goals that just don't go well with a company that reports on a quarterly basis."

He added that Aabar's generous funding from IPIC's coffers made the ability to raise money from public shareholders extraneous. Should the board of directors approve its conversion into a private company, Aabar would no longer be required to report financial information or make routine disclosures about its activities and investments. In its early years, Aabar focused on forging partnerships and seeking acquisitions of oil production and exploration outfits in the Gulf and Asia. In 2005, it bought Dalma Energy, an Abu Dhabi-based oil drilling company. A year later, it snapped up Pearl Energy, an oil exploration and production company based in Singapore, giving it a strong foothold in South East Asia.

But starting in 2007, the company made a radical change. It sold Dalma in the middle of that year to GulfCap, a Dubai-based company. It then offloaded Pearl Energy at the beginning of 2008 to Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, for about US$877 million (Dh3.22 billion). In September 2008, Aabar said it would issue bonds IPIC worth Dh6.68bn that would be convertible into shares. The bond raised IPIC's stake in Aabar to about 70 per cent and gave the company the cash to finance its transformation.

Aabar's first major purchase was a 9.1 per cent stake in Daimler in March last year, beginning a series of headline-grabbing investments that included buying AIG's private banking business in April last year and buying about 4 per cent of Tesla Motors, the maker of high-performance electric cars. Later last year, Aabar bought 32 per cent of Virgin Galactic, Sir Richard Branson's commercial space flight venture, for $280m.

The company now has assets of $10bn, Aabar's chairman, Khadem al Qubaisi, said in March. [e-mail]