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Banks Jostle for Roles in Abu Dhabi Property Merger

Banks Jostle for Roles in Abu Dhabi Property Merger

Abu Dhabi eyeing merger of developers Aldar, Sorouh; Advisory mandate for merger seen imminent – banker; Bankers trying to build inroads with cash-rich Abu Dhabi

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April 3, 2012 5:05 by



Global banks, including the likes of Goldman Sachs and J.P. Morgan Chase, are jostling to win the advisory mandate for Abu Dhabi’s state-backed merger of its two property developers, a ticket seen opening doors in the wealthy emirate.

Abu Dhabi is contemplating merging local developers Aldar Properties and Sorouh Real Estate in a state-backed tie-up that could create a company worth some $15 billion in assets.

Mandate announcements for the proposed transaction are imminent, according to bankers who have pitched for the role, and even though the deal value and potential fees from advising are not massive, bankers are keen to get into the good books of the oil-rich emirate in the hopes of gaining future business.

“There is very little M&A (mergers and acquisitions) activity happening in the region and you don’t want to miss out on the one where Abu Dhabi is involved,” a Dubai-based banking source said, speaking on condition of anonymity.

“At the end of the day, it’s not going to be how much money you make out of this deal, but how much you can in future if you win this one.”

Other banks that have pitched for the advisory role include Banc of America, Citigroup Inc, HSBC and Standard Chartered among others, according to bankers familiar with the matter.

Analysts say the deal, outlined in March, is aimed at shoring up Abu Dhabi sovereign wealth fund Mubadala, which has a big stake in struggling Aldar, and stabilising the emirate’s brittle real estate market.

A tie-up is seen as complicated, however, given the massive land banks the two companies hold and the work involved in arriving at a deal structure.

Abu Dhabi accounts for the vast majority of the UAE’s crude oil production and ranks amongst the top producers in the world.

The emirate has previously bought multi-billion dollar stakes in companies such as Barclays and Citigroup and is said to be in talks to buy a stake in Britain’s Royal Bank of Scotland.

Deal activity in the Gulf Arab region hit a rough patch in the wake of the financial crisis as an era of leverage buyouts waned and several high-profile investments suffered heavy losses. Several deals have been shelved recently mainly due to discrepancies in valuation expectations between buyers and sellers.

Middle East M&A volumes slumped 43 percent in 2011 to $10.1 billion, according to Thomson Reuters data. Fee income from advising clients on deals fell 37 percent to $221 million, adding further pressure on international banks to justify their previous ambitious expansion in the region.

THREE-LAYER MANDATE

Bankers say mandates for the proposed merger could be awarded by Aldar, Sorouh and also the executive committee in Abu Dhabi reviewing the deal.

Abu Dhabi may decide to appoint a single bank for the entire deal, a second banking source who has pitched for the mandate said. Discussions involving the structure of the deal and the banks to be appointed are happening at the highest level in Abu Dhabi, the banker added.

“Its a three-way structure that they are discussing but … a single bank may get the entire deal,” the banker said.

At the time of the announcement on the proposed merger, the companies said a decision would be made within three months.



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