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Mon 12 Mar 2012 05:28 PM

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Abu Dhabi stocks in 2-week high on Aldar merger talks

Stocks rise on back of talks between emirates' biggest developers

Abu Dhabi stocks in 2-week high on Aldar merger talks
Shares in Aldar and Sorouh rallied to nine-month highs.

Abu Dhabi stocks rose the most in two weeks after Aldar Properties and Sorouh Real Estate, the emirate’s biggest developers, said they are considering a merger that may create a company with US$15bn in assets.

Aldar, Abu Dhabi’s biggest property developer, and Sorouh, the emirate’s second-largest real estate firm, rallied to the highest in almost nine months. The benchmark ADX General Index rose 1.1 percent, the most since February 26, to 2,614.83, at the 2 pm close in the emirate. The Bloomberg GCC 200 Index fell 0.2 percent.

The two companies, which are involved in Abu Dhabi’s drive to transform itself into a tourism and business hub, said in a joint statement yesterday that they set up a team to study a possible merger with the “blessing” of the sheikhdom’s government. The team will present a plan in the next three months. Aldar and Sorouh advanced 9.8 percent, the most since October 2008 and December 2009, respectively. They both closed at AED1.34, their highest since June.

“The deal signals that the UAE government is committed to building a strong real estate development company that could withstand the current market turmoil in real estate,” said Nabil Farhat, a partner at Abu Dhabi-based Al Fajer Securities. “Both companies will eventually benefit under the new entity by getting new government projects, and access to cheap liquidity under the new structure. It is a win-win situation for all parties.”

Aldar got AED36bn (US$9.8bn) in government support last year and sold assets including a Ferrari theme park to the state. Property prices have fallen more than 60 percent in Dubai and 45 percent in Abu Dhabi from their peak in 2008 as the global credit crisis prompted banks to curtail lending and speculators fled.

Aldar and Sorouh shares have rallied this year after oil- rich Abu Dhabi said it plans to resume projects including branches of the Louvre and Guggenheim museums after reviewing their viability. Aldar is up 46 percent in 2012 and Sorouh has surged 58 percent.

The ADX Real Estate Index rose 9.7 percent, taking this year’s jump to 52 percent. The measure slumped 54 percent last year. About 138 million shares traded in Abu Dhabi today, compared with a 12-month daily average of about 69 million shares.

Oman’s benchmark stock index advanced 0.3 percent. Saudi Arabia’s Tadawul All Share Index increased 0.1 percent. Dubai’s DFM General Index dropped 1.1 percent after surging 4.7 percent yesterday. Bahrain’s measure, Qatar’s QE Index and Kuwait’s gauge fell less than 0.1 percent.

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