Aldar and Sorouh plan for merging

Abu Dhabi’s two major property developers Aldar Properties and Sorouh Real Estate said they have started talks on a possible merger which could create a new entity with Dh13.61 billion in assets based on the net value of their combined assets as of December 31, 2011.

“In line with this decision, a team will be set up to study the move and to look at the legal and commercial aspect of the merger, prior to making recommendations to their respective boards,” Aldar said in a regulatory filing with the Abu Dhabi Exchange, where both companies’ shares are listed.

The study will take three months and will be conducted in coordination with relevant government bodies. “The Abu Dhabi government is continuing to rationalize its projects and implement major restructuring plans in some of its most important entities, making it more responsive to market conditions,” Jones Lang LaSalle, the global real estate consultancy, said recently.

The merger plan comes a few months after Aldar’s $4.6 billion (Dh16.8 billion) bailout by its principal shareholder, the Abu Dhabi Government, taking the amount of government spending on Aldar, the emirate’s biggest developer, to Dh36 billion last year.

“It’s definitely a reflection of the challenging condition in the Abu Dhabi real estate market that needed a fresh approach,” Sudhir Kumar, managing director of Realtors International, a Dubai-based property consultancy, said.

Aldar last month reported a net profit of Dh642.5 million in 2011 compared to a loss of Dh12.65 billion in 2010, as well as Sorouh Real Estate also reported Dh383.3 million net profits for 2011 after provisions and compared with Dh16.2 million for 2010.

Regarding the net assets of the companies, Aldar’s net assets increased by 67% to Dh7.093 billion in December 2011 while Sorouh held net assets of Dh6.6 billion.

If successful, this will be the first major merger among the publicly listed companies in the UAE’s real estate sector, although earlier merger attempts between two of Dubai’s listed developers did not materialize, Dubai Properties had added Sama Dubai to its portfolio in a planned “realignment” a few years ago, as Gulf news stated.

The UAE’s property market has been impacted by the fallout of the global financial crisis that affected the market whose growth was fuelled, to a certain extent, by speculation.

To be mentioned that Aldar shares surged 8% to Dh1.22 on Sunday and Sorouh shares also rose 8% to Dh1.22.