Arabtec Holding will use some of the cash from Aabar Investments's stake in the firm to fund its own future acquisition spree, its chief executive said yesterday. Aabar, the Abu Dhabi firm that last year took a major stake in the championship winning Brawn GP Formula One team, said on Friday it would acquire 70 per cent of Arabtec, the largest construction company in the UAE, in a deal worth Dh6.4 billion (US$1.74bn).
The acquisition would come through a bond issued by Arabtec to Aabar that will convert to new Arabtec shares at maturity. The deal needs the backing of 75 per cent of Arabtec's shareholders and approval from government regulators. If it gains both, the firm will consider any "attractive investments opportunities", said Riad Kamal, the chief executive and founder. "When you have so much under your belt, your appetite becomes much better," Mr Kamal said. "[It could be] acquisitions, investments or taking equity in major developments where we feel we can then improve our chances of being involved in those projects."
The move would also allow the company - which built the 828-metre Burj Khalifa in partnership with Samsung Engineering and Construction and Besix - to hedge itself against any shortfall in capital resulting from delays in payments from property developers, and improve its ability to raise funds for future projects, Mr Kamal said. "We will have quite a strong financial position - and we believe Aabar can give us stronger access to the considerable major projects in Abu Dhabi."
Saud Masud, the head of research and senior property analyst at UBS bank, said there were major benefits for both sides in the deal. "For Aabar, Arabtec is as good as it gets in the region, so they get a crown jewel and significant leverage in terms of the long-term development of the UAE," Mr Masud said. "When there's development, particularly in Abu Dhabi, this will be one way of monetising the strongest contracting asset in the Middle East for their use."
Mr Masud said the deal also reflected the severity of payment issues between developers and contractors in Dubai, despite a $25bn bond programme financed by the Government of Abu Dhabi, Abu Dhabi banks and the Central Bank. "If a blue chip like Arabtec has to dilute its earnings to gain financing at this point, that tells me whatever controls and policies they put in place in the year haven't really worked," he said, in a reference to earnings per share.
"It tells me there's a systemic issue in terms of paying the real estate food chain. It seems that the federal support that has been given to mitigate that risk is not enough yet." The construction boom spurred Arabtec to start an acquisition spree in 2007, a strategy it hoped would help plug gaps in the construction supply chain. Within a year, the firm took a 60 per cent stake in Target Engineering, an Abu Dhabi company that specialises in civil, electrical and marine contracting; a 33 per cent stake in House of Equipment, a rental firm for construction equipment; and a 55 per cent stake in Gulf Steel Industries.
But the drive was abandoned by October 2008, when the global financial crisis hit the country's property sector, resulting in cancelled projects. Mr Kamal would not say if a revival of the acquisition plan had yet led to any specific investments. But he said: "This opportunity is in front of us now - [it could be] anything that will reinforce our operation and give it strength and diversification."
Not only will Aabar's stake give it access to the biggest builder in the country, it will also give the investment firm a foothold in Saudi Arabia, where Arabtec set up a subsidiary early last year, and Russia, where it has begun foundation tests at the site of Okhta tower in St Petersburg, the proposed tallest tower in Europe. Arabtec, which has a project backlog of Dh19bn, is also negotiating two large projects in Libya and others in Qatar.
The construction firm will become part of a growing property division in Aabar, which bought two plots in the Al Raha district near the Abu Dhabi International Airport in November 2008 for Dh500m. The company plans to develop up to four residential towers there. It also acquired 12 towers in six lots on Reem Island in Abu Dhabi for Dh5bn last February, and 14 more plots in Abu Dhabi last year for Dh2.7bn.
The International Petroleum Investment Company (IPIC), a Government energy investment fund, assumed majority ownership of Aabar in March last year. Before the takeover was announced on Thursday, Arabtec's shares closed 6.3 per cent higher at Dh2.89, while Aabar rose 5.2 per cent to Dh2.47. @Email:agiuffrida@thenational.ae
Need to know
The flights: Flydubai flies from Dubai to Kilimanjaro airport via Dar es Salaam from Dh1,619 return including taxes. The trip takes 8 hours.
The trek: Make sure that whatever tour company you select to climb Kilimanjaro, that it is a reputable one. The way to climb successfully would be with experienced guides and porters, from a company committed to quality, safety and an ethical approach to the mountain and its staff. Sonia Nazareth booked a VIP package through Safari Africa. The tour works out to $4,775 (Dh17,538) per person, based on a 4-person booking scheme, for 9 nights on the mountain (including one night before and after the trek at Arusha). The price includes all meals, a head guide, an assistant guide for every 2 trekkers, porters to carry the luggage, a cook and kitchen staff, a dining and mess tent, a sleeping tent set up for 2 persons, a chemical toilet and park entrance fees. The tiny ration of heated water provided for our bath in our makeshift private bathroom stall was the greatest luxury. A standard package, also based on a 4-person booking, works out to $3,050 (Dh11,202) per person.
When to go: You can climb Kili at any time of year, but the best months to ascend are January-February and September-October. Also good are July and August, if you’re tolerant of the colder weather that winter brings.
Do not underestimate the importance of kit. Even if you’re travelling at a relatively pleasant time, be geared up for the cold and the rain.
The biog
Favourite Quote: “Real victories are those that protect human life, not those that result from its destruction emerge from its ashes,” by The late king Hussain of Jordan.
Favourite Hobby: Writing and cooking
Favourite Book: The Prophet by Gibran Khalil Gibran
Our family matters legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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How Islam's view of posthumous transplant surgery changed
Transplants from the deceased have been carried out in hospitals across the globe for decades, but in some countries in the Middle East, including the UAE, the practise was banned until relatively recently.
Opinion has been divided as to whether organ donations from a deceased person is permissible in Islam.
The body is viewed as sacred, during and after death, thus prohibiting cremation and tattoos.
One school of thought viewed the removal of organs after death as equally impermissible.
That view has largely changed, and among scholars and indeed many in society, to be seen as permissible to save another life.
OIL PLEDGE
At the start of Russia's invasion, IEA member countries held 1.5 billion barrels in public reserves and about 575 million barrels under obligations with industry, according to the agency's website. The two collective actions of the IEA this year of 62.7 million barrels, which was agreed on March 1, and this week's 120 million barrels amount to 9 per cent of total emergency reserves, it added.
If you go
The flights
There are various ways of getting to the southern Serengeti in Tanzania from the UAE. The exact route and airstrip depends on your overall trip itinerary and which camp you’re staying at.
Flydubai flies direct from Dubai to Kilimanjaro International Airport from Dh1,350 return, including taxes; this can be followed by a short flight from Kilimanjaro to the Serengeti with Coastal Aviation from about US$700 (Dh2,500) return, including taxes. Kenya Airways, Emirates and Etihad offer flights via Nairobi or Dar es Salaam.
History's medical milestones
1799 - First small pox vaccine administered
1846 - First public demonstration of anaesthesia in surgery
1861 - Louis Pasteur published his germ theory which proved that bacteria caused diseases
1895 - Discovery of x-rays
1923 - Heart valve surgery performed successfully for first time
1928 - Alexander Fleming discovers penicillin
1953 - Structure of DNA discovered
1952 - First organ transplant - a kidney - takes place
1954 - Clinical trials of birth control pill
1979 - MRI, or magnetic resonance imaging, scanned used to diagnose illness and injury.
1998 - The first adult live-donor liver transplant is carried out
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Terror attacks in Paris, November 13, 2015
- At 9.16pm, three suicide attackers killed one person outside the Atade de France during a foootball match between France and Germany
- At 9.25pm, three attackers opened fire on restaurants and cafes over 20 minutes, killing 39 people
- Shortly after 9.40pm, three other attackers launched a three-hour raid on the Bataclan, in which 1,500 people had gathered to watch a rock concert. In total, 90 people were killed
- Salah Abdeslam, the only survivor of the terrorists, did not directly participate in the attacks, thought to be due to a technical glitch in his suicide vest
- He fled to Belgium and was involved in attacks on Brussels in March 2016. He is serving a life sentence in France
