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Wed 9 Jun 2010 03:04 AM

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Tamweel, Amlak said to weigh alternatives to gov't merger

Contigency plans being made in case the government backed merger is abandoned.

Tamweel, Amlak said to weigh alternatives to gov't merger
OPEN TALKS: UAE mortgage lenders, Tamweel and Amlak Finance, may open talks with alternative buyers in case their govt backed merger breaks down. (Getty Images)

Tamweel and Amlak Finance, two UAE mortgage lenders, may open talks with alternative buyers in case their government backed merger breaks down, a person with knowledge of the discussions said.

The UAE government has been working for 19 months on a plan to merge the two Islamic finance companies, which relied on wholesale borrowing to fund their lending, since the credit crisis cut off their funding.

Dubai property prices have slumped more than 50 percent from their peak in August 2008 as mortgages dried up, according to estimates from Colliers International.

Tamweel and Amlak are drawing up contingency plans should their merger be abandoned, said two people, who declined to be identified because the plans are private.

This may include Tamweel and Amlak merging and then combining with a commercial bank or the two being acquired separately by different banks, one of the people said.

Dubai Islamic Bank, the UAE’s biggest Islamic bank and owner of about 21 percent of Tamweel, may boost its stake, the bank told the Dubai Stock Exchange on June 2.

A spokesman for Tamweel declined to comment and a spokesman for Amlak couldn’t immediately comment.

The government may merge the two companies into a new Islamic bank and provide them with funding, UAE Economy Minister Sultan Bin Saeed al Mansouri told Dubai Television in October.

Amlak and Tamweel’s investors may own a third of the new bank, while the UAE and Dubai governments may share the remaining stake equally, al Mansouri said in the interview.

The delay in the merger “becoming a concern” and hampering communication with shareholders, Tamweel Chairman Sheikh Khaled Bin Zayed al Nahyan said in a Jan 27 interview. Trading in shares of the two companies have been suspended since November 2008.

The Dubai World Group, which is seeking to alter terms on more than $30 billion of debt, also owns 20.9 percent of Tamweel, according to data compiled by Bloomberg. Amlak is 48.1 percent owned by Emaar Properties, the UAE’s biggest property developer by market value, Emaar’s annual report shows.

Tamweel and Amlak are Islamic institutions, whose businesses comply with Muslim banking rules. Dubai has four Islamic banks - Dubai Islamic Bank, Emirates Islamic Bank, Dubai Bank and Noor Islamic Bank.

JPMorgan Chase & Co is advising on the merger. NM Rothschild & Sons Ltd is counseling Amlak on its valuation, while Nomura Holdings Inc is helping Tamweel.

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Craig 10 years ago

Let's hope that whatever merger comes about that the new management are able to become more realistic in their interest rates they are charging. 9.6% (just reduced from 10.1%!) is ridiculous given market conditions and absolute daylight robbery...