Arabtec rights 30% oversubscribed

Arabtec receives better-than-expected takeup of a Dh2.4bn rights issue that had spooked investors because of dilution concerns.

Arabtec shares rose 2.4 per cent to Dh2.13 yesterday after the announcement of the deal. Silvia Razgova / The National

Arabtec is to redistribute some Dh700 million in surplus capital to shareholders after its Dh2.4 billion cash call met with better than expected demand from investors.

The Dubai-based construction firm said yesterday that the rights issue was 30 per cent oversubscribed.

Arabtec sought to raise 1.56 billion new shares at Dh1.50 per share, substantially below the market price of Dh2.475 each in February when the deal was announced.

The company "will use the proceeds from the rights issue to advance the implementation of the company's growth strategy announced earlier in 2013", Arabtec said.

However, it added that the surplus would also be redistributed to existing shareholders.

The company's shares rose 2.4 per cent to Dh2.13 yesterday after the announcement of the deal.

Arabtec also said last month it would set a 10 fils per share dividend target for its 2013 full-year earnings in a further effort to mollify shareholders.

The company has been awarded Dh13bn in projects across the Middle East, North Africa and Central Asia this year, and has also established a new joint venture company, Arabtec-Samsung Engineering, as it seeks to expand its share of energy infrastructure and chase contracts around the region.

Last month, Arabtec extended the subscription period of its rights issue after increased demand from investors.

Shareholders approved a second rights issue to raise a further Dh2.4bn next year and a $450 million bond sale at the company's annual meeting in April. If needed, these are expected to take place next year.

Shareholders who did not participate in the rights issue stood to be heavily diluted by the share sale, but had little recourse because the UAE's market laws do not permit resale of the subscription rights, as is possible in other Arabian Gulf markets.

Although the redistribution of surplus capital would cushion the blow, smaller shareholders who opted not to subscribe "incurred an automatic loss because of dilution", said Talal Touqan, the head of research at Al Ramz Securities.

"That's why it's imperative to have a trading market for rights issues," he said.

Arabtec is 21.5 per cent owned by Abu Dhabi's Aabar Investments, its biggest shareholder, with minority stakes also held by institutional investors including Norges Bank, Norway's sovereign wealth fund and BlackRock, the American-based multinational investment management corporation.