The International Petroleum Investment Company (IPIC) agreed yesterday to raise its takeover offer for the Abu Dhabi-listed Aabar Investments by more than 34 per cent, handing a victory to minority shareholders in an unprecedented test of the country's stock market regulations.
The Emirates Securities and Commodities Authority (SCA), the body that oversees local exchanges, announced the increase from Dh1.45 to Dh1.95 a share after talks with the Ministry of Economy and Abu Dhabi Department of Economic Development on the fairness of the deal. The shares of Aabar, which is majority-owned by IPIC, opened at Dh1.55 on the Abu Dhabi Securities Exchange (ADX) yesterday and closed up 8.3 per cent at Dh1.57 after the announcement.
The shares had surged by 9.7 per cent in midday trading, nearing the 10 per cent cap allowed by regulations. "The SCA knows our interests as investors," said Hadi Saleh Mohammed, a trader who bought more than 100,000 Aabar shares last Wednesday. "They studied the offer and were not convinced that the stock is worth Dh1.45. The picture still has to reflect our interests as well." IPIC, one of the Abu Dhabi Government's most prominent investment arms, has energy-industry holdings that span the globe, including 64 per cent of the Austrian petrochemicals company Borealis and 20.7 per cent of Cosmo Oil in Japan.
Aabar was founded in 2005 as a small Gulf oil and gas holding company, but sold off its energy assets around the time IPIC began building up a 70 per cent stake at the beginning of last year. With generous injections of funds from IPIC, Aabar has since become one of Abu Dhabi's most visible investment companies, last year buying a 9.1 per cent stake in the German car giant Daimler and 32 per cent of Virgin Galactic, Sir Richard Branson's commercial space flight venture.
Aabar's latest purchase was last month's 5 per cent stake in UniCredit, Italy's largest bank. IPIC said last week it would give Dh1.45 a share to the minority investors as part of its plan to take full control of Aabar, although shareholders were free to hold on to their stakes following the delisting. That price was judged by some as too low given that the company's shares had traded as high as Dh2.10 in recent months. The Dh1.45 offer also valued Aabar at less than half of its book value.
The portion of Aabar that is publicly listed was worth about Dh6.3 billion (US$1.71bn) yesterday, according to Bloomberg figures. The higher price of Dh1.95 a share is the six-month average of Aabar share prices, the SCA said, adding that the offer would commence on Tuesday and run through to August 5. Investors would be paid cash for their shares on August 10, the regulator said. "I had mixed feelings," said Mohammed Ali Yassin, the chief executive of Shuaa Securities. "On the one side I was happy that through the committee they managed to come up with a better price than what the company offered. But this happened at the cost of some investors that the regulators should have protected."
Those investors, he said, included people who had sold their Aabar shares after the company announced that it was considering a takeover by IPIC last month. Aabar shares fell by 15 per cent from Dh1.68 on June 21, when the plan to go private was revealed, to Dh1.43 last Monday, when IPIC made its original Dh1.45 offer. The SCA should have suspended trading in Aabar shares immediately after IPIC's overtures were made public, Mr Yassin said.
"Since the SCA decided to establish a committee to discuss the offer and come up with a reply, they should have halted trading on the stock completely," he said. "It should have protected a big amount of people who waited so long and didn't hear anything back from SCA." Lawyers said yesterday the SCA's action was positive for shareholders and represented what could be the beginning of a drive towards clearer rules for takeovers of public companies. Analysts had worried after IPIC's Dh1.45 offer that foreign investors might be scared away from UAE markets if the SCA gave its approval, considering the price an affront to shareholder rights.
Procedures do exist in the UAE for delisting of companies from stock exchanges, but there are no formal guidelines covering mergers and acquisitions. "The regulator is trying to deal with situations as they arise, but from these crises we will hopefully see the emergence of a good regulatory framework," said Karl Tabbakh, a partner at DLA Piper Middle East. @Email:email@example.com @Email:firstname.lastname@example.org