Arabtec-Aabar US $1.7bn deal called off

Arabtec Holding has said that it will no longer pursue a plan to sell 70% stake to Abu Dhabi based Aabar Investments.

In a statement published on the Dubai Financial Market website, the company said it was abandoning the plan for the Abu Dhabi investment firm to take the stake, worth about $1.7 billion.

Arabtec said that acquisition documents would be terminated, adding that the two companies planned to work together in the future.

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"The parties have agreed that they will continue to work together in good faith towards future cooperation and forming a strategic partnership in Abu Dhabi in the future," the statement added.

The shock move comes just two days after Arabtec CFO Ziad Makhzoumi criticised analysts who oppose the deal, calling them “narrow minded.”

Makhzoumi said the deal with Aabar, which has been on the table since January, had many benefits for Arabtec.

“It’ll add value? Definitely. Any added liquidity in these times where credit is limited will help us support our expansion and fund cheaply our working capital and our investment in other countries, or possibly target some acquisition, is definitely welcome," he said.

UBS head of research and senior real estate analyst Saud Masud told Arabian Business: "I think the deal was important as Aabar would have acted essentially like a bank to support Arabtec on working capital and other financing needs.

"Short term, some may view this as a positive but I think if the market situation doesn't improve meaningfully Arabtec may run into receivables issues again."

Last month, Masud warned that Dubai construction firm was reliant upon its proposed $1.7 billion merger with Aabar Investments to offset millions of dollars in unpaid bills.

“I think the Arabtec story is linked to the Aabar deal in the near term; I don't see Arabtec being able to mitigate receivables exposure to Dubai without external support,” Masud said on Tuesday.

Earlier this month, Arabtec CFO Ziad Makhzoumi said that the company was owed $680 million in late payments.