Arabtec continues to cast a shadow over Dubai markets, months after the departure of its former boss. Now its influence over another listed construction company has attracted the scrutiny of regulators.
The Dubai financial regulator yesterday suspended the shares of the interiors specialist Depa in a row over the composition of its board of directors – half of whom came from Arabtec.
The Dubai Financial Services Authority halted trading in the stock on the Nasdaq Dubai from 10am Monday until further notice.
Depa confirmed that the DFSA had halted trading in its shares. "Because of technicalities concerning the composition of the board and its committees, which are not aligned with the corporate governance principles set out in the DFSA's market rules," said a company spokesman.
“The board is discussing these issues including the constitution of the board, the appointment of a permanent chairman and membership of the board committees.”
The DFSA and Depa declined to comment further.
However, market experts said that the stock was suspended because Depa does not have a chairman and because three of the six board members have ties with the Dubai-listed construction company Arabtec, which is also Depa’s largest shareholder.
“There are issues around the independence of the board members as well as the lack of a chairman,” said an analyst who asked not to be named.
In June, the former Arabtec managing director, Hasan Ismaik, resigned from his position as the chairman of Depa, leaving the Nasdaq Dubai-quoted firm without a chairman.
Depa’s board of directors has also been the subject of controversy since May last year, when Arabtec demanded greater representation on the Depa board.
At a tense annual general meeting, Depa shareholders agreed to appoint Mr Ismaik as chairman along with the current Arabtec acting chief executive, Mohammed Al Fahim; the Arabtec group general council, Wassul Fakhoury, and the chief financial officer of Arabtec’s construction business, Iyad Abdul Rahim.
“The makeup of the board [with three Arabtec board members] and the lack of a chairman means that the company could face some issues in making decisions,” said Tariq Qaqish, the head of asset management at Al Mal Capital. “If three say yes and the other three say no then there has to be a chairman to decide the vote.”
Arabtec owns a 24 per cent stake in Depa and had been rumoured last year to be looking at increasing its ownership as part of the company’s expansion plans.
However, the company drastically scaled back its plans after Mr Ismaik abruptly resigned, sending shares into a freefall and leaving question marks hanging over non-core business.
Like Arabtec, shares in Depa have risen steadily over the past year, increasing from about 40 fils in August last year to a high of 71 fils on June 17 – the day before Mr Ismaik resigned. Since then, shares have fallen slightly and closed at 67 fils on Sunday.
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