IPIC to buy out Aabar shares in delist plan

The International Petroleum Investment Company (IPIC) has offered to buy out the minority shareholders of Aabar Investments for Dh1.45 a share, as part of a plan to take full control of the company and delist it from the Abu Dhabi Securities Exchange (ADX).

The offer is effective from yesterday and will continue through August 1, Aabar said in a statement on the ADX website. The value of the offer is the same as Aabar's closing share price last Sunday, although it is about 15 per cent lower than the Dh1.70 price recorded on June 24, the day before the company announced plans to delist. IPIC owns more than 70 per cent of Aabar shares. It is not clear if minority shareholders who choose not to accept the IPIC offer have any recourse. Those shares are valued at close to Dh5 billion (US$1.36bn).

Aabar said in a statement accompanying the offer that "those who choose to continue to hold their shares will bear the risks associated with the transformation of the company into a private firm". An informed source said last week the regulator, the Emirates Securities and Commodities Authority (SCA), was studying the possibility of having an outside expert determine a fair valuation for the shares.

SCA officials did not return requests for comment. Some observers believe minority shareholders may have a grievance given that in May, Aabar issued a convertible bond that valued the company's shares at Dh2.50. "What happened today was not in the interest of minority investors," said Alfred Fayek, the managing director of MENA equity sales at EFG-Hermes in Dubai. Others interpreted the buy-back offer as a reasonable step for IPIC to take as majority shareholder.

"They don't have to make an offer," said Akram Annous of Al Mal Capital in Dubai. "It's a private offer, which is not part of the regulatory delisting process." But Mr Annous added: "Aabar clearly thinks the company is worth a lot more, which is why they want to delist." In yesterday's statement, Aabar also asked to delay until August 8 a meeting at which shareholders are scheduled to vote on the plan to go private. The meeting was previously slated for July 26.

Market analysts said the process would be closely watched because it would help to establish a legal framework for similar cases. "It is in the interest of the market to have a framework approved that is consistent with what is happening in other parts of the world and can be applied in our markets," said Muneef Tarmoom, the chief executive of ISAT Consulting in Abu Dhabi. Many countries have rules that provide minority shareholders an equitable "exit opportunity" but also prevent a few holdouts from blocking a company's plans to go private.

In the UK, for example, a company can delist its shares once it agrees on a price with holders of 75 per cent of its shares, according to the UK regulator, the Financial Services Authority. But if the company obtains approval from holders of 90 per cent of its shares, the other shareholders must give up their shares at the price previously offered. Since IPIC took a controlling stake in Aabar through a Dh1.5bn bond that converted into shares at the start of last year, the investment company has made a series of high-profile investments.

Aabar, which until IPIC's involvement was a small holding company with interests in oil exploration and drilling, last year bought 9.1 per cent of the German car maker Daimler. It has also bought 32 per cent of Virgin Galactic, Sir Richard Branson's commercial space flight venture, and major stakes in struggling European financial companies. [e-mail] [e-mail]