* Chairman Qubaisi says Aabar is long-term investor
* No projects have been cancelled, Egypt to go ahead
* But indicates expansion may moderate as focus on core
* "A few people" let go as part of cost-cutting drive
* Arabtec, UAE regulator say market not hit by poor
(Recasts with context, analysis)
By Stanley Carvalho and Maha El Dahan
ABU DHABI, July 2 The construction company at
the centre of Dubai's stock market meltdown sought to calm
investors on Wednesday by saying it still had the backing of a
key government shareholder and would rein in lavish salaries to
Khadem Abdulla al-Qubaisi, chairman of Arabtec,
was holding the company's first news conference since management
turmoil last month shook investors' faith in one of Dubai's most
The Arabtec saga exposed the dangers of investing in Gulf
stock markets, which benefit from strong economic growth but can
fall prey to wild speculation by local retail investors, weak
corporate disclosure and a hands-off approach by regulators.
In early June, wealthy Abu Dhabi state fund Aabar
Investments cut its stake in Arabtec to 18.94 percent from 21.57
percent, raising doubts over its willingness to support the
company. Then on June 18, chief executive Hasan Ismaik, who had
built a 28.85 percent stake in Arabtec, abruptly resigned.
Arabtec shares plunged 70 percent from a record peak in
mid-May to their intra-day low on Tuesday, erasing about $6.5
billion of value, as the company's silence on issues such as its
relationship to Aabar fuelled panic selling by leveraged retail
investors. This spread through Dubai's market, causing the main
stock index to tumble 31 percent from peak to trough.
Qubaisi insisted on Wednesday that his company had not been
damaged. He said Aabar, which has declined to comment on its
intentions towards Arabtec, still considered it a long-term
investment and might even raise its stake in future.
"There will be no cancellation of any projects and
operations are strong. The relations between Arabtec and Aabar
are stronger than before," Qubaisi said.
In particular, a $40 billion, state-backed deal for Arabtec
to build one million homes in Egypt over coming years will go
ahead; it has almost reached the design phase, he said.
Arabtec has emerged as a tool of the UAE government's
economic diplomacy through the deal. The UAE wants to support
the Egyptian government of former army chief Abdel Fattah
al-Sisi in order to stop any resurgence of the Muslim
However, there were signs on Wednesday that Qubaisi would
moderate the breakneck pace of growth which Arabtec managed
during Ismaik's 16-month tenure.
Ismaik had the firm diversify in new sectors such as oil and
gas work, real estate development, and mergers and acquisitions,
and into new geographical areas such as Serbia.
Qubaisi said Arabtec would now focus on its core
construction business, which had current projects inside and
outside the UAE worth about 26.2 billion dirhams ($7.1 billion).
He also said "a few people" had been let go as part of a
cost-cutting drive since Ismaik left; he declined to give
numbers. Earlier this year, Arabtec said its workforce totalled
"We are reviewing a lot of things. Yes, there were some
people who were overpaid. We are trying to introduce the right
policies for payment," Qubaisi said.
Mohamed Al Fahim, a board member from Abu Dhabi's
state-owned International Petroleum Investment Co (IPIC), the
parent of Aabar, was appointed acting CEO of Arabtec after
Ismaik's departure. Qubaisi said on Wednesday there was no
deadline for announcing a new permanent CEO.
There were early indications this week that Arabtec's public
relations offensive might win over investors. In the two trading
sessions before Qubaisi's news conference, its shares rebounded
27 percent, leading a partial recovery in the stock market.
However, the key question of the fate of Ismaik's 28.85
percent stake has not been resolved; Qubaisi said on Wednesday
that he could not comment on it. Ismaik told Reuters in late
June that he had three offers for the stake but was holding out
for more than double its current market value.
While Arabtec and Ismaik said he left the firm amicably to
pursue his own business interests, the abruptness of his
departure suggested management frictions, and a number of senior
executives linked to him have been let go since last month,
company sources told Reuters.
"It is comforting to see that Aabar is committed to the
company and Arabtec is now coming clear on their strategy," said
Nishit Lakhotia, head of research at Securities and Investment
Co in Bahrain.
"However, there will always be concern about what will
happen to Hasan Ismaik's stake, which needs to be sorted out at
It is also not clear whether Arabtec, or UAE financial
regulators, will improve standards of information disclosure
enough to ensure that future stock market panics can be avoided.
Qubaisi said on Wednesday that Arabtec was not responsible
for the market's plunge in June, attributing it instead to
political changes in the Middle East.
The Securities and Commodities Authority, which was
criticised by some fund managers for not pressing Arabtec to
answer investors' questions much sooner, issued a statement on
Wednesday saying it had acted correctly.
It said it could not have suspended trading in plunging
Arabtec shares pending clarification of the company's situation,
because that action could only be taken under circumstances
specified by rules.
"This does not apply to any case of the companies listed
currently on the market as they all play according to laid down
rules of listing, disclosure and trading," the SCA said.
(Additional reporting by Praveen Menon, Writing by Andrew