Abu Dhabi developers Aldar, Sorouh in merger talks

Companies say decision will be made in next three months; has blessing of Abu Dhabi gov't
Abu Dhabi developers Aldar, Sorouh in merger talks
By Andy Sambidge
Sun 11 Mar 2012 05:35 PM

Abu Dhabi developers Aldar Properties and Sorouh Real Estate said on Sunday they were in talks over a possible merger.

Aldar, which has twice been rescued by the Abu Dhabi government with bailouts totalling US$10bn, may merge with Sorouh in a state-backed tie-up, the two firms said in statements to the Abu Dhabi bourse.

A decision will be made in the next three months after a joint committee assesses the matter, the statement said.

"Aldar and Sorouh are discussing ways to merge with the blessing of the Abu Dhabi government," said the joint statement.

Earlier this month, Aldar Properties had the outlook for its ratings upgraded from negative to positive by Moody's Investors Service following a debt bailout by the Abu Dhabi government.

The developer, which posted full-year net profit of US$175m in 2011 following multi-billion debts the previous year, had its corporate family and probability of default ratings upgraded.

"Merging the two companies won't turn around the dynamics of the Abu Dhabi property market," said Robert McKinnon, ASAS Capital chief investment officer told Reuters.

"The problem is that both companies have fairly weak balance sheets and so merging them isn't going to solve that problem."

Abu Dhabi's largest developer by market value, Aldar returned to black in 2011 after it posted a loss of AED12.7bn in 2010 on massive writedowns on its assets.

The builder of the Yas Marina Formula One circuit made a fourth-quarter profit of AED182.1m, Reuters calculated, compared with a loss of AED11.14bn during the same period in 2010.

The Abu Dhabi government has given Aldar nearly US$10bn in bailout funds, almost equivalent to the amount it extended to neighbouring emirate Dubai at the height of its 2009 debt crisis.

The most recent was a US$4.6bn package, where the government bought assets from the struggling developer and retired a loan.

Abu Dhabi fared better than neighbouring emirate Dubai which saw a collapse in its property market and the restructuring of its flagship firm Dubai World.

However, the emirate is facing challenges now as a huge supply of high-end homes are expected to enter the market. Property prices in Abu Dhabi are expected to fall another 11 percent from here, a Reuters poll showed

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