Arabtec Holding insisted it had complied with stock exchange disclosure regulations over its US$1.7 billion (Dh6.24bn) deal with Aabar Investments, the Abu Dhabi Government-owned investment group. The Dubai Financial Market is already investigating trading in Arabtec shares in the period before January 7, when the Dubai construction firm announced it had clinched a deal for Aabar to buy a 70 per cent stake.
The shares soared by 33 per cent in the two weeks ahead of that announcement. In that period, both Arabtec and Aabar said there was no truth to market speculation that they had held talks about a takeover deal. In a statement to the DFM yesterday, Arabtec said it had held the first meeting with Aabar on January 4, just three days before the deal was announced. The company said it told the regulator, the Emirates Securities and Commodities Authority, immediately after those talks and cited the "need to maintain confidentiality regarding these discussions". It said it did not need to make a public statement on issues that were still under negotiation.
The company's statement did not calm investor concern over the share price movements. Rob McKinnon, the chief investment officer of Asas Capital, a Dubai stockbroker, said: "It is really hard to believe that this kind of deal could be put together in just a few days. I don't believe management teams in the UAE have been taught the proper disclosure procedures. Emirates Securities and Commodities Authority should issue further instructions on procedure during takeover situations."
He added: "Arabtec executives obviously believed they had no need to disclose the talks if there was no deal signed, but that's not what happens in most markets. I believe they [the exchange authorities] ought to launch a thorough investigation into the trading of Arabtec shares in that sensitive period." Other financial experts echoed that opinion. Rabih Sultani, a fund manager at Duet Mena, part of the Duet Group in London, said: "Sensitive information was leaked and obviously abused. We are hopeful regulators will take this investigation seriously to restore confidence and credibility to the market."
Arabtec shares began to rise on December 9 after a hitting an 11-month low on fear that the Dubai property decline would affect new business and make it more difficult for the company to meet its liabilities. Market speculation suggested that the company was in talks with Aabar, but both companies denied that in statements over the new year period. When the deal was announced on January 7, at a significant discount to the then market value, Arabtec shares fell sharply on market concerns that shareholders' value would be diluted and on apparent confirmation of fears over Arabtec's financial position.
The shares fell by 5 per cent yesterday, closing at Dhs2.47. @Email:fkane@thenational.ae