Dubai Index Declines on Below Market Offer for Arabtec Stake

By Zahra Hankir

Jan. 10 (Bloomberg) -- Dubai shares dropped for the first time in four days after Abu Dhabi-based Aabar Investments PJSC agreed to buy a stake in Arabtec Holding PJSC for 20 percent less than the company’s previous closing price.

Arabtec, United Arab Emirates’ biggest construction company, retreated the most in a month. Emaar Properties PJSC, the U.A.E.’s biggest developer, declined to the lowest level this year. The DFM General Index lost 1.2 percent, the biggest fluctuation among the seven Gulf markets, to 1,814.33. Most other Gulf benchmarks advanced.

“The Arabtec news is negative in the short-term because of shareholder dilution,” said Yazan Abdeen, a fund manager at ING Investment Management (Dubai) Ltd. In the longer-term, Arabtec will benefit on two levels, “first, cash, which will make the working capital of the company more efficient, and second, the amount of backlog that Aabar will bring to the table.”

Aabar, the Abu Dhabi government-owned investor, said Jan. 7 it plans an offer to buy 70 percent of Arabtec through the purchase of mandatory convertible bonds that will convert into shares at a price of 2.3 dirhams each, it said. That’s a 20 percent discount to Arabtec’s closing share price on Jan. 7.

Alaqaria

Arabtec tumbled 6.9 percent, the biggest one-day drop since Dec. 9, to 2.69 dirhams. The shares have increased 21 percent in the past two weeks. Aabar added 4.6 percent, bringing the gain this year to 11 percent, and pushing Abu Dhabi’s benchmark index up 0.2 percent.

Emaar shares dropped 2.5 percent to 3.95 dirhams, the lowest since Dec. 31.

Oman’s MSM30 Index advanced 0.5 percent, the Kuwait Stock Exchange Index rose 0.7 percent and Bahrain’s measure increased 0.1 percent. Saudi Arabia’s Tadawul All Share Index and Qatar’s DSM 20 Index each lost less than 0.1 percent.

Qatar Real Estate Investment Co., also known as Alaqaria, jumped the most in four years after Barwa Real Estate Co. agreed to purchase the developer of industrial and residential projects.

Alaqaria soared 9.7 percent, the most since March 2006, to 30.5 riyals. Barwa added 2.7 percent to 33.9 riyals, the highest close in almost three weeks.

To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net.