Shares in Dubai construction firm Arabtec dropped on the first full day of trading after the group announced that it had agreed to sell a controlling stake to an Abu Dhabi state-run investment fund.
The investment’s structure could reduce the value of stakes held by existing shareholders, according to analysts, and Arabtec shares dropped by 6.9% during the first full day of training since the announcement of the deal with Aabar Investments.
Arabtec, which has Dubai state-linked companies among its customers, could benefit over the long term. The deal was made during the current push for closer economic integration between Dubai and the oil-rich federal capital Abu Dhabi, although it is distinct from the cash injections to Dubai’s government in 2009.
Vice president of research at Dubai-based investment bank Shuaa Capital, Roy Cherry, said: “Being owned by the Abu Dhabi government does improve the odds of collecting your receivables in Dubai.”
Aabar will pay 6.42 billion dirhams (£1.08bn) for a 70% stake in the construction company, although the deal must still be passed by existing shareholders. The Abu Dhabi government is the majority owner of Aabar, which has made investments in Richard Branson’s commercial space travel start up Virgin Galactic and Formula 1 constructor Brawn GP in the past 12 months.
Arabtec’s balance sheet, which has been hit by a property slump in Dubai and the global economic slowdown, will be shored up by the fresh funds. The additional funds could be used to fund acquisitions and equity stakes in development projects, according to Arabtec’s chief executive Riad Kamal. However, Mr Kamal is refusing to make further comment until the deal is finalised.