Aldar, Sorouh merger 'at advanced stage'

Abu Dhabi's top two developers says a final accouncement on deal is imminent
Aldar, Sorouh merger 'at advanced stage'
By Reuters
Wed 07 Nov 2012 04:34 PM

Abu Dhabi's top two developers - Aldar Properties and Sorouh Real Estate - said their government-backed talks were at an advanced stage.

The two companies also both reported higher quarterly profit on Wednesday, albeit with impairments and asset writedowns as valuations fell, highlighting glum conditions.

Their merger talks were started against the backdrop of continuing oversupply and declining house prices. Prices in Abu Dhabi were expected to fall 5 percent this year, a Reuters poll found.

"The due diligence is pretty much complete. It is only a matter of a little more patience before a final announcement," Sorouh Real Estate chief financial officer Richard Amos said.

"These things take quite a lot of time," he said. The two companies, which started talks in March, had previously said a decision on whether to merge would be reached by June.

Aldar - the larger company and which built the Yas Marina Formula One Circuit, home to the Abu Dhabi Grand Prix - said a valuation review ahead had prompted it to write down AED737m ($201m), mainly related to hotel assets.

Aldar took provisions for impairments and write-offs of AED932m, compared with AED2.5m a year ago.

Sorouh took a fair value loss of AED126.5m on investments.

Abu Dhabi has spent over $10bn on Aldar, equivalent to the amount it needed to rescue Dubai from a bond default in 2009. In return, land on Al Raha beach, the Ferrari World Theme Park, and other key assets, were sold to the government.

Aldar posted a 43 percent rise in third-quarter net profit to AED206m dirhams, on revenue that nearly halved to AED1.6bn. Profit grew as the company wrote back AED431.5m of excess accruals and recoverable costs written off previously.

Meanwhile, Sorouh reported a net consolidated profit of AED129m, up 55 percent. Income got a boost after Sorouh reversed AED40m in contingency provisions for its Sun and Sky towers, which have been completed. Quarterly revenue fell 9.8 percent to AED803m.

The developer said its results were buoyed by revenue from national housing projects - government-awarded schemes to build homes for UAE citizens - which rose to AED60m from AED68m.

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