Sources close to the $15 billion merger of Aldar Properties and Sorouh Real Estate reported that the capital’s two biggest developers were finalizing a deal over how much of the new merged entity will be owned by shareholders from both sides. It is understood that no cash will change hands in the transaction.
Neither Aldar – the company behind Yas Island and Ferrari World – nor Sorouh – which includes Sun and Sky towers on Reem Island among its projects – would comment on the news of the share swap.
However, both developers published separate, identically worded statements on the Abu Dhabi Securities Exchange confirming that merger discussions were at “an advanced stage”.
They added that “a decision will be taken by the companies’ boards of directors as to whether or not to recommend the merger to the company’s shareholders in due course”.
News of the imminent merger sent shares soaring to near their maximum price limit although they retreated later, with both falling about 5.7 per cent.
Regulations allow shares to rise by a maximum of 15 per cent and fall by a maximum 10 per cent per day.
“The expectation from the market is that an agreement has now been reached over how much each company’s shares will be worth in relation to the other going forward,” said Tariq Qaqish, the deputy head of asset management at Al Mal Capital, a Dubai-based investment institution. “The mechanism by which the merger will happen, however, is still not clear but we understand that there is one now.”
Aldar and Sorouh originally announced their intention to investigate a merger last March after both firms were hit hard by the property downturn in Abu Dhabi. For much of the time since then the companies’ share prices have moved in tandem as investors anticipate the long-awaited merger.
“The impact of this agreement has already been seen with shares increasing 14 per cent,” said Saleem Khokar, the head of equities at National Bank of Abu Dhabi.
“It is unclear at the moment whether the two companies will form a new entity in which individual shareholders will each get a proportion of new shares based on their holdings in Aldar and Sorouh or whether they will use one of the companies already there. What matters is that there is more clarity for the market and that is very positive.”
Analysts added that the merger would provide a positive boost to the stricken Abu Dhabi property market, enabling the Government to offer work to just one player rather than sharing it out between the city’s two main developers.
The move is also thought to be likely to provide clarity and stability to the market by ensuring better coordination for new property projects.
If it goes ahead, the merger would be one of the biggest ever merger and acquisition deals in the Middle East.