Aabar's shareholders face uncertain future

Stock falls sharply over questions about buyback process.

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A week after Aabar Investments announced plans to delist its shares from the Abu Dhabi Securities Exchange (ADX), the fate of minority shareholders remains unclear. At issue is whether the investment firm, which is 71 per cent-owned by the Abu Dhabi Government-controlled International Petroleum Investment Company, will be required to buy back the other shares, valued at close to Dh5 billion (US$1.36bn), or whether those shares will continue to trade over the counter.
In a statement released to the ADX last Monday, the company hinted at the latter option. But a source familiar with the situation said the Emirates Securities and Commodities Authority (SCA) was researching two options that would require Aabar to buy out the minority shareholders. Under one plan, the shares would be valued according to their trading ranges in recent months. In another, a third party would determine a fair value for the shares, and the company would be required to pay that price.
The source said the SCA was studying the procedures of other markets around the world to determine the correct approach. Neither the agency nor Aabar responded to requests for comment. The reason for the uncertainty is that what Aabar proposes to do is unprecedented in UAE markets. "We don't have an educating example of a delisting in the UAE," said Mohammed Khodeir, a partner at the law firm Al Tamimi and Company.
And existing SCA regulations do not clearly spell out the process for delisting, Mr Khodeir said. Aabar shares have declined sharply since the delisting announcement, as most analysts interpret the company's statements to mean that it does not expect to buy out minority shareholders. "There is no indication that Aabar will either cancel [existing shares] or initiate a buyback," said Ali Khan, the head of equities at investment bank Arqaam Capital in Dubai.
Many foreign institutions bought Aabar stock after the firm began making headline-grabbing investments in the past two years. Those investors are unlikely to be pleased to have to unload the shares in the over-the-counter market - the so-called grey market- where volumes are thin. "It is certainly difficult for foreign investors," said Fadi al Said, a senior fund manager at ING Investment Management in Dubai.
Aabar is the largest shareholder in the German car maker Daimler, owning a 9.1 per cent stake. It also holds 32 per cent of the space tourism venture Virgin Galactic and a 4 per cent stake in the US electric sports car maker Tesla Motors. Last month, Aabar's Luxembourg unit acquired a 4.9 per cent stake in the Italian banking group UniCredit. Aabar is planning a meeting for July 26 to seek shareholders' approval to delist the shares from the Abu Dhabi exchange.
The company released a statement on June 28 saying the conversion into a private joint stock company was not intended to affect the ability of the shareholders to trade their shares. "Shares of private joint stock companies are traded outside the markets and dealings in shares are registered with the company's registrar after the issuance of the ministerial resolution to amend the company's articles of association," Aabar's statement said.
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