(MENAFN- Khaleej Times) Arabtec Holding, the UAE's largest construction company, is considering a merger with the biggest contractors in Saudi Arabia and Kuwait, according to chief executive officer Hasan Abdullah Ismaik.
"We are now mulling mergers with the two biggest construction companies in the Gulf, one is in Saudi and one is in Kuwait," Ismaik said in an interview with CNBC Arabia without naming the other companies. "The benefits will be felt by the shareholders and the market."
Arabtec, which helped build the world's tallest tower in Dubai, in February replaced its management after Abu Dhabi state-controlled Aabar Investments raised its stake and exerted more influence on the company's board. The Dubai-based builder raised Dh2.4 billion ($653 million) in a rights issue in July and said it will use the funds to bolster its oil and gas installation and affordable housing businesses.
Arabtec is in talks to merge with Kuwait's Combined Group Contracting and Saudi Arabia's Saudi Oger, Kuwait's Al Qabas newspaper said on Wednesday, citing people it didn't identify. Arabtec didn't respond to calls seeking comment. Saudi Oger also didn't respond to calls, while no one at Combined Group was able to comment immediately.
A combination with those companies may produce mixed results for Arabtec, Loic Pelichet, an analyst at NBK Capital, wrote in a note to clients on Wednesday.
It would boost the company's access to Saudi Arabia's booming market and Kuwait, where the government may be set to raise development spending, he wrote. On the other hand, such a move "would fly in the face of the strategy the company has proclaimed since its takeover by Aabar,namely to push for aggressive expansion into oil and gas engineering," Pelichet said.
Neither Combined Group nor Saudi Oger are involved in that industry, so a merger would either represent a strategic U-turn or Arabtec would pursue both the merger and the energy exploration expansion "in which case the execution risk would rise significantly". Pelichet recommends investors sell Arabtec shares.
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