Arabtec shares surge

Arabtec shares surge to a three-month high after a planned sale of a 70 per cent stake in the builder to Aabar Investments is terminated.

Arabtec shares surged to a three-month high this morning after a planned sale of a 70 per cent stake in the builder to Aabar Investments was terminated. It comes just weeks after Nakheel, one of Arabtec's largest clients, was offered $8 billion (Dh1.4bn) in fresh funds as part of the Dubai World debt restructuring proposals. Arabtec stock was up by about 6 per cent in early trading after both companies released statements announcing the end of the planned acquisition. The companies said that they "will no longer pursue the original transactions and will terminate the acquisition documents", adding they "will continue to work together in good faith towards future co-operation and forming a strategic partnership in Abu Dhabi in the future. Aabar said in January that it would acquire the stake in Arabtec at Dh2.30 per share by using a convertible bond. The offer was attractive for both companies at the time: Aabar was getting a slice of the UAE's biggest construction company at a price of Dh6.4 billion (US$1.74bn), which would have allowed Arabtec to overcome liquidity problems as a result of cancelled contracts, stalled projects and non-payment from developers. But the deal lost its impetus when the Dubai World debt restructuring proposals were announced, paving the way for the injection of billions of dollars in fresh capital to Nakheel, part of which would go towards paying its trade creditors. "After the Dubai World announcement, Arabtec's receivables are looking more comfortable," said Majed Azzam, an analyst at HC Securities. "So this would have made them decide that they don't need a capital injection from Aabar, especially because the price was significantly lower when offered. Arabtec might have looked to sell at a higher price, and Aabar wouldn't have wanted to do that." [e-mail]