Arabtec To Raise $650m Via Rights Issue By End-June

Dubai-based contractor Arabtec, part-owned by Abu Dhabi state fund Aabar Investments, will raise $650 million through a rights issue before the end of June to help to fund expansion.

The company said on Wednesday the fundraising was part of a five-year expansion plan, which could include a further capital increase of $650 million by the end of 2014 if needed.

Arabtec, builder of Dubai’s famous palm islands, replaced its chief executive last month in a shake-up led by Aabar, its largest shareholder, which has been tightening its grip on the group.

Abu Dhabi is trying to revitalise its real estate sector after the financial crisis and Arabtec has a track record of building high-profile projects. Aabar, which has 22 per cent of Arabtec, has been exerting its influence over the group since it became the biggest shareholder last year.

The company will use the cash raised from shareholders across four of its business areas. Some 55 per cent will help to support growth in its oil and gas, infrastructure and power business and 25 per cent will go on building affordable housing projects.

“The capital raisings are essential in helping us to achieve out strategy,” Hasan Ismaik, the new chief executive, said in a statement. Ismaik replaced Riad Kamal, who was the company’s founder.

Arabtec had said last month it aimed to raise around $1.8 billion in total through a rights issue and convertible bond.

Arabtec’s shares have fallen more than 30 percent since the announcement of the rights issue and management change on Feb. 27. The rights issue was planned at a near 50 per cent discount to Arabtec’s then stock price.

As well as equity, Arabtec may raise as much as $450 million from the bond market at the end of 2013 or in 2014. But this would only be raised if required, and when acquisition targets and certain business opportunities have been identified, the company said.

Arabtec is currently looking for a new chief financial officer and chief operating officer, with searches for both positions at an advanced stage, Wednesday’s statement said.

In a separate statement, Arabtec named Iyad Abdelrahim as CFO for its construction business. Abdelrahim was formerly CFO at Dubai Properties Group, part of state investment vehicle Dubai Holding.