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Tabreed Retreats as Dividend Stirs Dilution Concern: Dubai Mover

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Feb. 25 (Bloomberg) -- National Central Cooling Co. posted the biggest drop in almost 10 months on concern minority shareholders may have their positions diluted by a dividend payout to Abu Dhabi’s Mubadala Development Co.

The United Arab Emirates utility known as Tabreed slumped 4.7 percent, the largest decline since May 6, to 1.61 dirhams at the close in Dubai, on volume of 2.7 times the three-month daily average, data compiled by Bloomberg show. The stock was the biggest decliner on the benchmark DFM General Index, which fell 0.1 percent.

Tabreed, whose shares rallied the most in Dubai last year, said today it planned to pay its first cash dividend in eight years of 5 fils a share for 2012, as a recovery in the U.A.E. property market boosts demand for its air-conditioning systems. Mubadala, which owns almost 15 percent of Tabreed, is entitled to an equivalent payment as a bondholder, which it will accept as notes that can be converted into shares by April 2019.

“The stock is falling on further dilution concerns, as Mubadala is also entitled to the dividend,” said Marwan Shurrab, vice-president at Dubai-based Gulfmena Investments Ltd.

Mubadala in 2011 agreed to provide Tabreed long-term capital of 1.7 billion dirhams ($463 million) in mandatory convertible notes due 2019 and a loan facility of as much as 1.4 billion dirhams. Tabreed said in December it will convert 1.13 billion dirhams of loans from Mubadala into mandatory convertible bonds.

Shares of Tabreed have rallied another 33 percent this year after last year’s 144 percent jump. The company is benefiting from an increase in demand for air-conditioners as Gulf Cooperation Council countries, which have yearlong sunshine, pursue infrastructure expansion.

The company, whose 2012 profit jumped 29 percent, operates 59 plants in the U.A.E. and six in other Gulf countries, according to its financial statements. It last paid a cash dividend in 2004 and paid a seven percent stock dividend in 2007, data compiled by Bloomberg show.

To contact the reporter on this story: Sherine El Madany in Dubai at selmadany@bloomberg.net

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

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