Arabtec Holding has pulled out of plans to buy the Malaysian piling company, Pembinaan Kien Sinar, and is looking to strike a deal with a UAE-based contractor instead, the company said yesterday. Arabtec, the largest construction firm in the UAE by market value, had been in talks with Pembinaan Kien Sinar since March this year, but has abandoned the deal because it felt the move would not provide the resources needed for its contracts in the UAE.
"Essentially, we didn't think they had the number or quality of equipment that we thought was appropriate to bring to Dubai," said Thomas Barry, the executive director and general manager at Arabtec. "Also, the availability of new equipment was on a very long-term delivery, so we felt that we had to search elsewhere." Mr Barry declined to name the UAE piling firm in its sights or how much the deal would be worth, but said "we're very close to finalising the procurement".
Arabtec has been on an acquisition drive since November last year - a strategy it hopes will help plug gaps in the construction supply chain. The acquisitions include a 60 per cent stake in Target Engineering, an Abu Dhabi company that specialises in civil, electrical and marine contracting, as well as a 33 per cent stake in House of Equipment, a rental firm for construction equipment. Earlier this year, Arabtec also acquired a 55 per cent stake in Gulf Steel Industries.
The venture with the piling contractor would bring the number of subsidiaries owned by Arabtec to 12. "We now think that for projects that require us to be able to do the piling and enabling works, it would help to have our own piling firm," said Mr Barry. Mr Barry added that one of the biggest challenges facing contractors right now was sourcing good quality subcontractors, particularly in the area of curtain-walling, glazing, joinery and mechanical, engineering and plumbing.
"One of the problems we face is the availability of subcontractors who can cope with the magnitude of projects that are being undertaken in Dubai and Abu Dhabi," he said. "I don't think subcontractors have expanded to the extent contractors have in terms of their own resources, so they don't have sufficient resources to meet the schedule, which means we struggle on a number of projects when it comes to completion."
Developers only have about 25 piling and foundations firms to choose from in the UAE, hampering the start of many large-scale projects, while established piling companies in the region have reported workloads of up to 70 jobs a year. Arabtec announced a record second-quarter net profit of Dh273.6 million (US$74m) on July 26, up by more than 140 per cent on the same period last year. Riad Kamal, the chief executive, said the profit was driven by "the expansion strategy implemented by Arabtec, and acquisitions which focused on proper integration for large scale operations".
Arabtec announced a flurry of new contracts in the quarter, including its largest residential construction contract of this year, a Dh3 billion agreement to build 1,500 homes at the Al Furjan development in Dubai, a Nakheel project. Last week Arabtec announced it had been awarded its second contract in a month from Emaar Properties - a Dh1.6 billion (US$435.6 million) deal to build 1,437 villas at the Bawadi project in Dubailand.
The company said it would also be responsible for designing the properties at the project, which Emaar was developing in a joint venture with the Dubai Holding subsidiary, Tatweer, for about Dh60bn. Emaar and Tatweer are developing 6.5 million square metres of land at Bawadi, a project that has an overall investment of Dh200bn and is set to be the largest hospitality and leisure development in the world. Arabtec's new contract brings the value of its jobs in hand to about Dh38bn.
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