Arabtec Drops to 2-Month Low on Dilution Concern: Dubai Mover

Arabtec Holding Co. slumped to a two-month low on investor concern the United Arab Emirates builder’s plan to raise capital via convertible bonds may dilute the positions of shareholders.

Shares of the country’s biggest construction company by market value fell 9.7 percent to 2.41 dirhams, the lowest level since Jan. 2, at the close in Dubai. Arabtec was the biggest decliner on Dubai’s benchmark DFM General Index, trimming its gain to 0.4 percent. Some 2.5 million Arabtec shares were traded, less than a quarter the three-month daily average.

Arabtec has tumbled 19 percent since the company said Feb. 27 it seeks to raise $1.74 billion to fund internal growth, acquisitions and joint ventures. The plan includes $450 million of convertible bonds, as well as a rights issue.

“Investors remain concerned over the dilutive impact of any new convertible bond,” according to Julian Bruce, Dubai-based head of institutional trading at EFG-Hermes Holding SAE. “Greater detail of any issue, including conversion price, will be required to afford any degree of comfort.”

Arabtec is reviewing financing options and “will decide upon the right structure in due course,” newly appointed Chief Executive Officer Hasan Ismaik said today. The shares dropped 9.8 percent last month after rallying 32 percent in January.

The fundraising comes as Abu Dhabi-based Aabar Investments plays a bigger role in the company after last year raising its stake to 21.6 percent. Arabtec has won large projects in Abu Dhabi in the past year, including construction of a branch of the Louvre museum and a terminal at Abu Dhabi airport.

Arabtec is committed to remaining publicly listed, Ismaik, who replaced Riad Kamal, said today. Aabar, an Abu Dhabi government controlled company, delisted from the emirate’s stock exchange in 2010.

Four analysts advise holding Arabtec shares, while nine recommend selling, according to data compiled by Bloomberg.