| Kippreport.com

ALDAR-SOROUH MERGER: Sources claim initial agreement reached

January 9, 2013 7:29 by Reuters

Abu Dhabi’s two biggest real estate developers have reached an initial agreement to merge via a share swap, with a final deal expected to be signed in the coming weeks, sources familiar with the matter told Reuters.

 

Aldar Properties and Sorouh Real Estate have a combined market capitalisation of about 10 billion dirhams ($2.7 billion), which would make the proposed merger one of the biggest conducted by listed firms in the Middle East.

 

The merger would create a state-backed company with combined assets worth nearly $15 billion, and could help to repair Abu Dhabi’s weak real estate market by ensuring better coordination of new property developments.

 

With the support of the Abu Dhabi government, which owns a major stake in Aldar, managements of the two companies have held discussions for nearly a year on asset valuations, financial terms and the new management structure, the sources said.

 

The merger will be based on a share swap and will not involve a cash payment, two sources said. The terms of the share swap could not be confirmed.

 

The sources spoke on condition of anonymity because the matter has not been made public. Aldar and Sorouh declined to comment.

 

“The deal had the blessing of the state from the beginning but it was always a matter of getting an agreement on the valuation,” said a senior banking source familiar with the matter.

 

“A lot of permutations and combinations were put forward and there was involvement from the highest authorities when it looked like things were getting out of hand.”

 

Shares in both companies rose sharply in response to news of the initial merger agreement, although it is not clear whether the deal will be beneficial to investors in both; that will depend on the ratio of the share swap. Aldar shares jumped 10.7 percent and Sorouh surged 13.7 percent.

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