DUBAI, (Reuters) – Dubai’s Arabtec fell on Sunday after the firm agreed to sell a controlling stake to Abu Dhabi’s Aabar Investments in a deal seen as negative for Arabtec’s minority shareholders, weighing on Dubai’s index .DFMGI.
Aabar surged 4.6 percent to lift Abu Dhabi’s index to a four-week high, Agility helped Kuwait’s benchmark advance and Qatar ended lower despite gains in two merging property firms. Oman hit an 11-week high as funds bought bank stocks and Saudi Arabia fell for the first session in seven as its own lenders declined.
Aabar will buy a controlling stake in Arabtec for $1.7 billion through convertible bonds in a deal that will provide cash and contracts for the Dubai builder.
Arabtec’s shares fell 6.9 percent to 2.69 dirhams in its biggest decline for a month as Dubai’s index fell 1.2 percent. The stake sale is priced at 2.30 dirhams per share, pending shareholder approval.
“The deal solves any short-term liquidity issue, which is obviously a positive for the stock and will probably bring long-term synergies for the company’s order book,” said a Dubai-based analyst who asked not to be identified.
“But in terms of dilution it seems like a very high price to pay for existing shareholders. The implication is that the liquidity situation with Arabtec was worse than the market had assumed, because this is a big capital injection.”
On Nov. 25, Dubai asked for a standstill on billions of dollars of debts linked to the state-held holding firm Dubai World. Wealthier neighbour Abu Dhabi has bailed Dubai out to the tune of $25 billion in the past year.
“At first glance, the (Arabtec) deal looks very dilutive: our 2010 (estimated) EPS (earnings per share) would be cut by 61 percent,” Deutsche Bank wrote in a research note.
“The deal could be led by the Dubai government, as part of some assets reshuffling with Abu Dhabi. While Dubai has no equity stake in Arabtec, it is the largest debtor through the receivables,” the note said.
Matthew Wakeman, EFG-Hermes managing director for cash and equity-linked trading, said the deal would dominate trading on Dubai’s bourse for the rest of this week at least.
“Investors will speculate where Arabtec may spend some of the cash should the deal go through so expect contracting stocks in the region to also be in focus,” Wakeman added.
Qatar Real Estate (Alaqaria) jumped 9.7 percent to a 13-month high and Barwa Real Estate rose 2.7 percent after the pair agreed initial terms to merge. Each Alaqaria share will be exchanged for 1.1 Barwa shares.
Kuwait’s Agility surged 4.9 percent to a two-week closing high following newspaper reports saying a U.S. court case had been postponed until Jan. 29, lifting Kuwait’s index to its third gain in four sessions.
On Nov. 16, a U.S. court indicted Agility on fraud charges relating to contracts with the U.S. Army. Agility’s stock has fallen 41 percent since the charges were filed.
Bank Muscat rose 0.8 percent to a 10-week closing high amid renewed institutional interest.
“The overall situation is very good, with strong buying from pension funds and asset managers,” said Adel Nasr, United Securities brokerage manager.
“The expectation is for the banks sector to perform much better in 2010 because they won’t have to take provisions.”