The chief executive of major Dubai construction firm Arabtec resigned on Wednesday after a tumultuous six weeks during which the company’s share price plunged as much as 50 per cent and a major backer of the firm cut its shareholding.
The Arabtec saga dragged down the Dubai stock market and illustrated the opaque nature of corporate affairs in the region, as investors were left uncertain about the fate of one of the Gulf’s biggest and fastest-growing contractors.
The resignation of Hasan Ismaik, who was appointed chief executive in 2012, was to take effect after a company board meeting scheduled for Wednesday afternoon in Abu Dhabi, an Arabtec spokesman said.
He declined to comment further but a source familiar with the situation said Mohamed Al Fahim, a board member from Abu Dhabi’s state-owned International Petroleum Investment Co (IPIC), would become Arabtec’s acting CEO.
Forbes magazine said this month that Ismaik, 37, had become the first Jordanian billionaire – and the third-youngest billionaire in the Middle East – because of his holdings of Arabtec shares. It estimated his net worth at $1.4 billion, adding that it was not clear where he had raised the money to buy the shares.
Arabtec, which saw its revenues jump 30 per cent to $2 billion last year and says it has about $59 billion of projects in the pipeline, is politically important because it has become a tool of the United Arab Emirates’ economic diplomacy.
Earlier this year the company won a $40 billion deal to build one million homes in Egypt over coming years, part of the UAE’s efforts to support new Egyptian President Abdel Fattah al-Sisi against Islamist forces.
Arabtec shares closed 1.9 per cent higher in Dubai on Wednesday after news of Ismaik’s resignation emerged, in a sign that investors hope his departure may stabilise the firm.
The move followed a plunge in the company's share price this month and a decision by Abu Dhabi state fund Aabar Investments, a major shareholder, to cut its stake in Arabtec to 18.94 percent from 21.57 percent.
The sale prompted speculation that there was a rift between Ismaik and Aabar management. Ismaik himself has denied that, while Aabar declined to comment. Support from Aabar is important for Arabtec's ambitious expansion plans, which are in part based on large contracts that Aabar steered its way.
Market reaction to Ismaik's departure shows investors hope the company will stabilise and there will be less volatility in the shareholder structure, said Sebastien Henin, head of asset management at The National Investor in Abu Dhabi.
However, by the late afternoon Arabtec had not issued a statement explaining the resignation or discussing its post-Ismaik strategy, so considerable uncertainty remained.
Other property-related stocks in Dubai also rose. Emaar Properties added 1.3 percent and Deyaar climbed 1.7 percent.