(Reuters) – UAE government officials have told Aabar Investments (AABAR.AD) to raise its buyout offer to minority shareholders by over a third after the Abu Dhabi company angered investors with a lowball bid.
Aabar, controlled by government investment vehicle International Petroleum Investment Corp (IPIC), must increase the price to 1.95 dirhams per share from the 1.45 announced last week, the United Arab Emirates’ bourse watchdog said in a statement on Sunday, citing the ruling of a panel that included officials from the UAE economy ministry.
It said the new offer price is based on the average closing price of the share in the six months preceding the offer.
The announcement from the Emirates Securities & Commodities Authority (SCA) sent Aabar’s share price up 8.3 percent to 1.59 dirhams and drew renewed criticism from an investment community already angry that the initial offer was so low.
“The timing has been unfortunate. The suggestion that 1.45 would be the trade price would have caused investors to sell around that level,” says Zahed Chowdhury of Al Mal Capital.
“The fact there are no clear rules and regulations for such events didn’t help anybody.”
Another investor said trading in the investment firm, whose holdings include about 9 percent of German carmaker Daimler (DAIGn.DE) and 4.99 percent of Italian bank UniCredit (CRDI.MI), should have been halted after news on July 12 that the government panel would study the offer.
“Who will profit and who will lose and who will compensate (those) who had to sell last week between 1.42 and 1.45?” said Mohamed Ali Yasin, CEO of Shuaa Securities.
“I believe that the small investor got mostly hurt in this, and he is the one the regulator is trying to protect the most in this market, and that is not what happened here.”
In Sunday’s announcement, SCA also said the offer period should run from July 20 until August 5. The original period was July 12-August 1.
A shareholder meeting to approve delisting is scheduled for August 15. The statement also said the transaction should be complete by August 10.
DELISTING AFTER LESS THAN 5 YEARS
The delisting move was announced earlier this year and some investors had hoped for a much higher price.
It takes Aabar, one of the more transparent groups in the secretive world of sovereign funds since its IPO in late 2005, back into the shadows, and marks the first retreat of a local firm from the Abu Dhabi bourse.
Aabar is majority owned by IPIC, and has assets estimated at about $10 billion, including the stakes in Daimler and UniCredit, which are together worth about $7.8 billion based on Reuters data and closing share prices last week.
According to Abu Dhabi bourse data, IPIC holds 75.5 percent of Aabar.
PRICE STILL TOO LOW?
Valuation is tricky, and it is unclear exactly how many shares are in issue and how many are held by minorities, but investors say even the improved offer undervalues their holdings.
“It is difficult to come up with a valuation because there isn’t complete transparency in terms of the derivatives on Aabar’s balance sheet,” says Robert McKinnon, ASAS Capital chief investment officer.
(But) “The rest is typically fairly easy to value because it is a pretty much a holding company and so we can look at its net asset value, which is essentially the book value.
“The offer price is about 55 to 60 percent of this and the question a lot of people are asking is; Why there is such a discrepancy?”
McKinnon said he nevertheless expects minority shareholders to accept Aabar’s revised offer, although cheap compared to the company’s balance sheet, because of the current economic environment.
Aabar and IPIC were not immediately available for comment.
(Additional reporting by Stanley Carvalho in Abu Dhabi, Writing by Andrew Callus, Editing by Dinesh Nair)