The UAE-based Arabtec Holding is in negotiations to buy Kuwait’s Kharafi National. Sources close to the transaction say an initial agreement has been made and the acquisition is expected to be completed in the coming months.

Arabtec is already the UAE’s most active construction company, with a backlog of close to AED60bn ($16bn). Acquiring Kharafi National would make it one of the region’s largest construction firms.

Kharafi National is a specialist mechanical, electrical and plumbing (MEP) contractor. It was set up by Nasser al-Kharafi and Ghalib Younis in 1976 as a local contracting company serving Kuwait’s construction industry. At the time, it was the region’s first MEP contractor. It has since expanded across the region and also holds concessions in wastewater treatment plants and other utilities.

Arabtec has been strengthening its own MEP capabilities. In October last year, it completed the acquisition of a 45 per cent share in the local Emirates Falcon Electromechanical Company (Efeco), taking its ownership of Efeco to 100 per cent. In December, Arabtec announced plans to raise the share capital of Efeco by AED500m.

In 2013, there was widespread market speculation that Arabtec was in discussions to buy another specialist MEP contractor: Dubai-based Drake & Scull International. These rumours were dismissed by the company at the time.

In an interview with MEED in late January, Arabtec Holding’s managing director and CEO, Hasan Ismaik said the company planned to acquire or merge with other regional players and list subsidiary companies on stock markets across the region.