Uncertainty over steps in Aabar delisting

Multi-stage process may include requirements by regulator to protect minority shareholders and could take as long as six months to finish.

The news that Aabar Investments was planning to delist its shares from the Abu Dhabi Securities Exchange (ADX) surprised most market observers, many of whom responded with the same question: how exactly does that work? The short answer is that no one seems to be sure.

The bourses's regulator, the Emirates Securities and Commodities Authority (SCA), does not appear to have specific guidelines in place and has not replied to requests for clarification. Aabar has only released a statement, and it has raised as many questions as answers. According to a fund manager who said he was briefed by an SCA compliance officer, the procedure could take as long as six months.

It will probably involve several steps that include obtaining approval from the ADX and 75 per cent of Aabar's shareholders. The company could also be required to ensure creditors do not object, change its articles of association and update its trade register. Aabar is 71 per cent owned by the International Petroleum Investment Company, which is controlled by the Government of Abu Dhabi. The fate of Aabar's minority shareholders, who hold close to Dh5 billion (US$1.36bn) worth of the shares, has not yet been decided.

According to Aabar's statements, the company is suggesting that its outstanding shares could be traded over the counter once it had delisted. A source familiar with the situation said the SCA was also looking at requiring Aabar to buy out the other shareholders. Even if the over-the-counter option is agreed to, analysts say they are not sure how the shares would be traded. "Someone will have to create a platform. We are not clear who would do that, if they will be traded on an exchange with over-the-counter platform, which exchange it will be," said Saud Masud, the head of research at UBS in Dubai.

But Mr Masud said Aabar's decision to pursue the delisting appeared sensible. "Going private suits their business model as being public slows their decisions and they have to bear the additional cost of compliance," he said. "When the company went public, it had different needs. Now they may be better off being delisted and operate as a private company instead of tapping the equity market at this point."

The question now is how expensive it would be to make that move. The only previous examples of delisting in the country occurred at the NASDAQ Dubai, which is regulated by the Dubai Financial Services Authority (DFSA) as opposed to SCA. In the past two years, five companies - Kingdom Hotel Investments, a primary-listed equity, and the secondary listings Monarch Gold Mining, Sphere Investments, Boulder Steel and Citigold - elected to delist from NASDAQ Dubai.

According to NASDAQ Dubai regulations, to voluntarily delist a primary equity, the issuer must give at least 90 days notice to the exchange's regulator, the DFSA. For a secondary equity, the notice requirement is 60 days. The regulations also stipulate that in the case of a primary listing, holders of three quarters of the shares must agree to a delisting, a spokesman for the exchange said. Over the past 10 years since the Dubai Financial Market (DFM) has been operating, only Salam International, a Qatari firm with a dual listing on the Doha and Dubai bourses, has opted to delist from DFM, doing so last year.

When National Bank of Dubai and Emirates Bank International merged in 2007 to form Emirates NBD, both banks delisted from the exchange and relisted as Emirates NBD. No shares were cancelled or bought by the issuers in that case. skhan@thenational.ae halsayegh@thenational.ae