The US$40 billion Arabtec-Egypt deal to construct one million low-income housing units hit headwinds in June 2014 when Arabtec’s former chief executive Hasan Ismaik unexpectedly resigned.
Under Mr Ismaik’s leadership, the Abu Dhabi-based construction firm had pursued a new strategy of expansion, establishing a property development company in December 2013 with the aim of entering the affordable housing sector across the region.
The huge Egyptian million-unit housing project signalled a major step forward for Arabtec’s endeavor to diversify away from traditional construction activities, which had suffered considerably following Dubai’s property downturn.
While hard hit by the 2008 financial crisis, Arabtec entered a period of revival in 2012 when the Abu Dhabi Government-owned Aabar Investment demonstrated commitment to the company by becoming the majority shareholder and taking a number of seats on the board.
In January 2013 Arabtec was awarded with the $653 million Abu Dhabi Louvre contract by the government-owned Tourism Development and Investment Company (TDIC), suggesting the fruits of its new relationship.
Early 2014 brought even further success for Arabtec’s aggressive expansion campaign. In addition to the $40bn project signed with Egypt in March, Aabar Investments awarded Arabtec a $6.1bn contract to build 37 towers in Dubai and Abu Dhabi.
The contract was accompanied by an announcement that Arabtec would be awarded with all future projects in the Abu Dhabi Government investment firm’s international construction portfolio, totalling approximately $20bn.
The Aabar Investments chairman Khadem Al Qubaisi said the enormous deal was “in recognition of what Arabtec has achieved, under the able leadership of Hasan Ismaik, and we will not spare any effort to support Arabtec and its ambitious vision”.
However, this period of impressive growth ran into complications upon Mr Ismaik’s sudden resignation, accompanied by an extensive reshuffling of the executive board.
Mr Ismaik’s departure came after it was revealed in June last year that he had quietly become Arabtec’s majority shareholder, overtaking Aabar and shaking investor confidence.
The move prompted a collapse in Arabtec’s share price, which had more than tripled between January and May 2014 from Dh2.08 to Dh7.40.
Despite early hiccups, Arabtec seems to be back on the map as one of the region’s leading construction firms.
Aabar has reclaimed its position as the clear majority stakeholder in the company, with 36.11 per cent of shares, and Arabtec’s early mega-projects seem to be in motion.
As for its Egypt deal, while the project has yet to commence, the hold up seems to be coming from Arabtec’s Egyptian government partner.
With Aabar now the clear majority stake holder there is perhaps even more reason to see the project as a form of state-to-state economic diplomacy, signaling potential major property development activity in Egypt for Arabtec in the near future.
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