Dubai contractor Arabtec’s proposed merger with Aabar Investments is still on track, with a possible closure in March, and the firm expects to post better profits in the fourth quarter, its CFO said on Sunday.Aabar had agreed to acquire a 70 percent stake in Arabtec last month in a deal valued at about $1.7 billion.
Shares of Arabtec, the UAE’s largest contractor by market value, have been pressured recently by speculation that the deal may not go through.
Speaking to Reuters in an interview, Arabtec’s Chief Financial Officer Ziad Makhzoumi said:”There is no reason for the deal not to go ahead,” adding the capital injection from Aabar will be used to accelerate the contractor’s expansion plans and for potential acquisitions.
He said: “We are always looking at potential acquisitions, some of them will be immediate, some of them will possibly be at a later stage.”
Arabtec shares closed 2.6 percent lower at #0.60 in Dubai while Aabar shares fell 2.5 percent in Abu Dhabi, as Gulf stocks declined following weak cues from global markets.
Aabar’s offer to acquire the Arabtec stake would be difficult to turn down, Deutsche Bank said in a note on Feb 4, and cut its price target on Arabtec shares to $0.81 from $1.22 to factor in dilution from the deal.
Others were also positive on the deal.
Chet Riley, equity research analyst at Nomura International in Dubai, said:”Nomura still thinks this represents a good deal for Arabtec,” .
He added: “The key is how much of that cash injection will go towards receivables repair and how much towards the company’s expansion plans and we are not going to get a clearer idea until there is formal communication from the company with regards to the deal.”
Makhzoumi said he expects to post sequentially better profits in the fourth quarter, helped by cost reduction initiatives and its Saudi Arabia operations.
Makhzoumi said: “We were able to deliver more in Q4, cost cutting procedures paid dividends and in Q3 we didn’t have the impact of Saudi Arabia,” adding that the summer and Ramadan period also impacted activity in the third quarter.
Arabtec posted a third quarter net profit of $45.4 million.
It set up a joint venture in Saudi Arabia in March last year to tap growth opportunities in the Arab world’s largest economy and to weather a storm in its home market, where property prices have fallen some 50 percent from their peaks and billions of dollars of projects have been cancelled or put on hold.
Arabtec said later on Sunday it won a contract to build a hotel in the Syrian capital Damascus with a construction value of about $67 million.
The five star Yasmeen Rotana, owned by Al Fajr SA of Syria, is valued at more than $120 million, Arabtec said in a statement. It is Arabtec’s second project in Syria.
In the same interview, Makhzoumi said: “We hope that market (Syria) will be a big market for us.”
He addded: “They are opening the market for foreign investment. Tax laws are clearer, availability of some funding is there, the ownership of land is being opened up.”
The company is also in advanced discussions for projects in Libya, he added.
Arabtec has won a number of contracts recently in Saudi Arabia, Abu Dhabi, Qatar and the West Bank.
The firm has a backlog of projects worth around $7.6 billion, Makhzoumi said. (Reuters)
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