Abu Dhabi’s state-owned Aabar Investments PJSC is weighing whether to increase its stake in Dubai construction company Arabtec Holding Co. after announcing last month it had cut its holding.
“Arabtec is an important company to Aabar and in the future we will review the stake we own in Arabtec in a positive way for the company,” Khadem Al Qubaisi, chairman of both companies, told reporters in Abu Dhabi today. The investment is a “strategic” one for Aabar, he said.
Arabtec gained almost 15 percent in Dubai trading, the most in more than two years. Aabar last month cut its Arabtec stake to less than 19 percent from almost 22 percent, stoking concern that the builder may be losing the backing of Abu Dhabi’s government. Arabtec Chief Executive Officer Hasan Ismaik quit on June 18 after Dubai’s largest listed builder lost a third of its market value in two weeks, sparking a stock sell-off in the emirate’s benchmark index.
“I don’t think Arabtec is behind all this crash,” Al Qubaisi said. “Why are we behind this crash? Give me a reason? Is it because the CEO resigned?”
Ismaik said on June 23 he had received three offers for his 28.8 percent stake in the company from government entities and private investors. Al Qubaisi said he understood that Ismaik owned the stake under “different names or different people.” He also said he was confident there was no corruption or impropriety linked to the outgoing CEO.
The construction company’s volatile share price reflected a market that’s still hampered by a lack of transparency and governance questions, according to analysts and investors. On June 25, Ahmed Mohammed Rahma al-Shamsi, a member of the Federal National Council, said the country’s financial markets needed more transparency.
“Transparency will improve a lot in Arabtec in the next few months,” Al Qubaisi said. “You will see a lot of things coming from Arabtec.”
Al Qubaisi said no Arabtec projects have been canceled and the company has an order book of 26.2 billion dirhams ($7.1 billion). “Positive” second-quarter earnings are expected to be released by the end of this month, and the company will focus on construction in Egypt, Saudi Arabia and the U.A.E., he said.
During Ismaik’s 15-month leadership, Arabtec announced plans to expand into oil and gas, infrastructure and power and it formed a venture with Samsung Engineering Co. to provide engineering, procurement and construction services. The company in March agreed to build 1 million homes with a value of about $40 billion for low-income families in Egypt.
“We need to focus on the core business which is construction,” Al Qubaisi said. “Arabtec is a construction business, not oil and gas and the message to the public is the focus is in construction.”
Arabtec executives including its chief operating officer and head of risk were among hundreds of employees dismissed since Ismaik’s departure, people with knowledge of the matter said last month.
“There was a group of executives that we have no place for in the company and has been let go,” said Al Qubaisi. “We are replacing them with new people with experience in construction.”
He said the company was looking to cut payroll costs by not hiring people from banks who would be paid “five to six times the salaries of construction people.”
Arabtec won’t delist from Dubai Financial Market, he said.