Arabtec Stake Boost May Signal Aabar Seeks Control, ING Says

Aabar Investments PJSC (AABAR) raising its stake in Arabtec Holding Co. (ARTC) may signal its intention to control the Dubai-based builder after pulling a $1.74 billion bid two years ago, according to ING Investment Management.

Aabar, the Abu Dhabi government company which owns stakes in Daimler AG (DAI) and UniCredit SpA (UCG), increased its ownership in the United Arab Emirates’ biggest construction company to 5.28 percent, according to data posted on Dubai’s stock market. The shareholding is listed under Aabar Petroleum Investments Co., which in 2008 sold most of its energy assets to Mubadala Development Co., another investment unit owned by the Abu Dhabi government. Emirates Construction Material Co. owns a 5.03 percent stake, the data shows.

“It’s obvious from an investment size perspective that Aabar will not stop at 5.28 percent,” said Yazan Abdeen, who helps oversee about $250 million as a fund manager at ING in Dubai. “So it has already acquired more and is in the consolidation phase now. I expect this percentage will increase considerably, which will entitle Aabar for control of Arabtec.”

Arabtec shares slumped 7.1 percent, the most since March 2011, to 3.25 dirhams. The stock has surged 104 percent this year on speculation investors are accumulating the shares on bets the company will benefit from regional infrastructure spending. That compares with a 25 percent gain in Dubai’s DFM General Index. (DFMGI)

The builder, whose board meets tomorrow to discuss financial results, may post a 57 percent drop in full-year profit to 133 million dirhams ($36 million), according to the average estimate of 12 analysts on Bloomberg.

’Rumor Mill’

Arabtec has been eying opportunities outside its home market after construction work slowed in Dubai. The company said in November the value of a contract it won in Saudi Arabia may rise to 1.5 billion riyals ($400 million). A unit of Arabtec, a builder of the world’s tallest tower in Dubai, in January won a 561 million-dirham contract for the Dubai International Airport’s expansion. One of its units also won 256 million dirhams in contracts in Abu Dhabi this year.

“The disclosure has restarted the rumor mill, with some saying that it supports the view that there is a renewed bid on the table,” said Julian Bruce, the Dubai-based director of institutional sales trading at EFG-Hermes Holding SAE.

Aabar offered in 2010 to buy 70 percent of Arabtec through the purchase of bonds that would be exchanged for shares for 2.3 dirhams each. After the deal fell through, Arabtec and Aabar said they planned a “strategic partnership” instead. Arabtec Chief Financial Officer Ziad Makhzoumi couldn’t be reached for comments.

Any entity that owns 5 percent or more of a company’s shares is required to disclose ownership details to the stock market, according to the Securities & Commodities Authority rules.

To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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