(Updates with Dubai index gain in 6th paragraph.)
June 23 (Bloomberg) -- Arabtec Holding Co.’s head of mergers and acquisitions, Shohidul Ahad-Choudhury, has been dismissed following the resignation of Chief Executive Officer Hasan Ismaik, a person familiar with the situation said.
Hundreds of employees at the United Arab Emirates’ largest construction company, including a number of managers, have also been fired since Ismaik’s departure, according to three people familiar with the situation who asked not to be identified because the information is private.
Ahad-Choudhury, a former Deutsche Bank AG executive, joined Arabtec in March 2013. Calls to his personal mobile yesterday were not returned, while a number listed on his business card was out of service. A public relations executive for Arabtec in Abu Dhabi declined to comment on the dismissals when contacted by phone.
“This will be taken negatively by the market as investors will be concerned about the company’s future strategy,” Julian Bruce, the head of institutional trading at EFG-Hermes U.A.E. Ltd. in Dubai, said by telephone yesterday. The staff cuts will raise questions about “scaling down of projects and the direction of the company,” he said.
Former CEO Ismaik resigned last week after the company’s share price slumped amid speculation the builder was losing government backing. On June 5, the stock exchange revealed that he had become Arabtec’s largest shareholder, with a 28.8 percent stake. Abu Dhabi’s state-owned Aabar Investments PJSC, on June 11 confirmed it has reduced its stake in the firm to 18.85 percent from 21.57 percent. The stock fell 30 percent in the intervening four trading days.
Arabtec’s shares slid 9.9 percent to 3.84 dirhams yesterday in Dubai, the lowest level since March 18. The stock has plunged 48 percent since reaching a record 7.4 dirhams on May 14, yet remains 87 percent stronger this year. By comparison, Dubai’s benchmark stock index climbed 33 percent this year.
Ismaik, who was has been replaced by Arabtec board member Mohamed Al Fahim as acting CEO, said on June 18 that he would consider selling his stake in the company if he gets an offer.
Under Ismaik’s 15-month leadership, Arabtec aimed to become a top-10 global contractor, expanding into areas including oil and gas and infrastructure. Arabtec formed a joint venture with Samsung Engineering Co. to provide engineering, procurement and construction services.
Arabtec’s new management “needs to clearly outline its strategy for the company and let investors know what will happen to Ismaik’s stake in the company,” Bruce said. Investors will be concerned that such large stake may start making its way onto the market, pressuring the stock, he said.