By Jason Benham and Firouz Sedarat
Move would consolidate Emaar with three developers owned by Dubai's ruler.
Dubai Holding, owned by the ruler of the Gulf emirate, and leading developer Emaar Properties said on Friday they are in advanced talks to merge four local real-estate companies.
A joint statement said the move would consolidate Emaar, which is building the world's tallest tower in Dubai, with three developers owned by Dubai's ruler - Dubai Properties, Sama Dubai, and leisure developer Tatweer - that are all prominent players in a sector badly hit by the global financial crisis.
Emaar's shares closed at 3.21 dirhams ($0.87) on Thursday, well off their 28.75 dirham high, reached in September 2005. Reuters data showed Emaar's enterprise value was 23.9 billion dirhams, and that it had net debt of AED3.8bn.
Property prices in the seaside emirate - with its iconic palm tree-shaped islands - have slumped since last year when the global economic crisis and a drop in oil prices ended an economic boom in the Gulf region.
"Emaar and Dubai Holding ... with the assistance of their financial advisers, the Royal Bank of Scotland PLC and Merrill Lynch International respectively, are in the process of finalizing a thorough assessment of the merits of this proposed consolidation," the statement said.
The assessment covers areas including "the valuation of the various entities as well as ... the potential transaction structures," it said.
"Consolidating these three companies with Emaar is a natural progression in the evolution of the Dubai real estate landscape, providing benefits to all stakeholders," Mohammed Al Gergawi, chairman of Dubai Holding, said in the statement.
Emaar Chief Financial Officer Amit Jain and Emaar Dubai Holding's Chief Executive, Issam Galadari, declined to comment when contacted by Reuters.
Executives at Dubai Properties, and Sama Dubai could not immediately be reached for comment. Saaed al Muntafiq, executive chairman of Tatweer, declined to comment.
"Given the sharp drop in project pipeline it is a good idea to right size Dubai Holding businesses exposed to various projects," said Saud Masud, real estate and construction analyst for the Middle East and North Africa at UBS.
"The merger is the right thing to do. It is a much needed catalyst and could lead to bigger M&A activity."
Earlier this week, Peter Riddoch, chief executive of Damac Properties, the emirate's largest private developer, told the Reuters Global Real Estate Summit in London he believed prospects for consolidation in Dubai remained high as the government looked to support its property firms.
Tatweer said earlier this month the bankruptcy of its partner Six Flags, one of the largest theme park operators, would not delay a multi-billion dirham park project in Dubai.
Tatweer is building at lease seven theme parks in the Gulf Arab emirate.
Dubai Holding said in February it would merge back-office operations at Dubai Properties, Sama Dubai and Mizin to cut costs. (Reuters)
While this makes good business sense at a time when unity is strength, preserving the integrity of the respective brands should be of paramount importance. Though slightly faded, Emaar has great international traction, while the others have no real identity beyond the region. What they really need to do is dump all the toxic assets in one place, and hive the entity off to brave investors. The other danger through this rationalisation is the loss of lots of jobs, many for Emiratis.
This is one of the best news I heard for a long period of time. EMAAR is the most experience and one of the most professionaly managed property companies in Dubai. They handled the customers during the crisis better than all the other developers. EMAAR certainly can bring in much needed expertise and Tatweer has lot to learn and in particular the way they are handling the REMRAAM (project with 11,000 residential units) with its customers are beyond imagination.
kumara, While it certainly makes good business sense to merge and consolidate these big entities, I am not really sure what impact it is going to have on REMRAAM project which is by MIZIN.I am not even sure if the project is going ahead as per schedule though it is claimed by developer that they are on schedule. Let us hope for the best. Please share any more information if you have.