Abu Dhabi-based Aabar Investments and Arabtec Holdings have agreed for Aabar to acquire a 70 per cent stake in Arabtec by way of a convertible mandatory bond for a fixed purchase price of Dh2.3 per share.
Arabtec said in a statement yesterday that its share capital will be increased from Dh1.19 billion to Dh3.98bn after the conversion of the mandatory bond so that Aabar Investments will own 2.79 billion shares for a total investment consideration of Dh6.42bn.
Arabtec's announcement came after Aabar's board made the offer public on Thursday. This came after both companies denied news reports and rumours in stock markets about the deal since late last month.
"Formal discussions between the two parties commenced on January 4, culminating in an agreed position on Thursday, January 7. Closing of the transaction is only subject to completion of legal diligence by January 13, 2010 and Arabtec shareholders' consents through an extra-ordinary general meeting (EGM) and obtaining the necessary regulatory approvals," said Arabtec.
The transaction will further consolidate Arabtec's market leading position in its industry and marks Aabar's industry leading position as a diversified investment group.
Although the deal will lead to delusion of Arabtec's shares, analysts and market participants see the deal as a positive move for the company. Arabtec will get a strong liquidity of Dh6.4bn which will far cover any potential defaults on payments to the company.
Riad Kamal, CEO of Arabtec, said last year that the company has almost $1bn (Dh3.67bn) of outstanding receivables.
Analysts also see the move as very positive for the outlook of Arabtec business as the company will have a strong access to major projects in Abu Dhabi, one of Arabtec's regional targets for expanding its construction business along with Saudi Arabia and Qatar.
This is the first acquisition by Aabar in 2010 after it made several investment deals last years. Aabar, the largest shareholder in Germany's Daimler, already entered into a $1.625bn loan agreement with a number of international and local lenders last month.
Aabar and Daimler also acquired a majority shareholding in Brawn GP, winner of the 2009 Formula 1 constructors' and drivers' championships last November. The company also made an investment of $328m in American Depository Shares issued by Banco Santander, the Brazilian subsidiary of Banco Santander.
The company also acquired a 32 per cent stake in Virgin Galactic, the world's first commercial spaceline, for $280m. Aabar has committed $100m-plus transaction cost to fund a small satellite launch capability.
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