By Ulf Laessing
Both boards feel new merged entity stood little chance of securing financing.
Dubai property firms Deyaar and Union Properties have scrapped merger plans, a newspaper said, as the real estate sector battles against crossfire from the Gulf emirate's debt crisis.
Shares of both companies fell on Dubai's main index, amid a broad decline by UAE property stocks.
Dubai developer Deyaar said it is not in merger talks, and said it remained focussed on exploring growth opportunities in the UAE and other markets.
"The company's board is not currently engaged in any merger talks with any firm," it said in a statement on Wednesday, adding it has not provided any information to any entity regarding any potential merger.
Daily Al Khaleej said in an unsourced report that both boards saw little chance of merger succeeding as a new entity would struggle to secure financing.
Neither firm could immediately be reached for comment.
"I don't think a merger would improve their financial positions," said Julian Bruce, EFG-Hermes director of institutional sales. "Right now, getting finance for anybody is more difficult after the Dubai debt crisis."
Markets have been coping with fallout from Dubai since late November, when the emirate's flagship conglomerate Dubai World said it would request a standstill on $26bn in debt linked to property units Nakheel and Limitless World.
Speculation about a possible merger between Deyaar and Union Properties began last year, although both firms denied they were in talks.
In March, Deyaar said it would consider merging with another company but was not in any consolidation talks.
Dubai's once-booming property sector, which boasts the world's tallest building, has suffered a sharp slowdown triggered by the global financial crisis, with some analysts saying prices have fallen by around 50 percent.
Analysts expect the debt crisis to further delay recovery in the sector.
Deyaar's shares fell 5 percent at 1031 GMT while Union Properties declined 4.4 percent.
"There are still a lot of doubts about Union Properties, its short-term prospects," said Chamel Fahmy, regional senior sales trader at Beltone Financial.
"The stock has shown a lot of weakness. Investors generally stay away although there's been some pure speculating on the stock ... the report could be an element." (Reuters)