Abu Dhabi has made its first offer that Dubai cannot refuse.
On Friday, the weekend in Dubai it was announced that Aabar, an Abu Dhabi government investment vehicle, had agreed with Arabtec to purchase mandatory convertibles for 6.4B AED which, when converted, will give Aabar 70% of the share capital of Arabtec. The conversion ratio implies a price of 2.3AED per share a 20% discount to where the shares closed on Thursday afternoon implying that Aaabar has acquired well more than complete control of the company for a discount from the current owners. Ordinarily current shareholders demand a premium to relinquish control. As a person who specialized in trading options around takeovers this is what in Wall Street merger-arbitrage parlance we call a “take-under.” At least that is how it looks at first glance but as with so much in Dubai one has to look a little deeper to see what substance for the shadow.
Firstly it is important to know what Arabtec is. Arabtec is a construction company in Dubai that was founded in 1975 by Riad Kamal, a London educated engineer and very enterprising Palestinian who founded the company when what we know as Dubai was merely a glimmer in the eye of Sheikh Mohammed. Arabtec became a highly competent subcontractor for the industrial and real estate development projects in Dubai. Take the Burj Dubai/Khalifa for example. Emaar announces a major project raises money through equity, debt, and forward sales of off plan real estate. It then takes that money and hires Arabtec to actually do the building. Emaar is a marketing and development company, the building gets done by Arabtec, and they did a lot of it. Arabtec built such Dubai mega-projects including such wonders familiar to Dubai visitors as Terminal 1 at DXB and the Burj Al Arab, (not to mention such questionable micro projects as the elevators in my old office in the DIFC Gate Village.)
No comments:
Post a Comment