UAE bourses merger likely to be announced in December

Dubai: The merger of UAE’s bourses seems to be have been agreed to by the two stock exchanges and is now awaiting the outcome of the valuation exercise, sources with knowledge of the plan told Gulf News. 

“It’s almost a done deal, and it is currently at the valuation stage,” said one of the sources, adding that it is very likely that the announcement of the merger will be made by the end of the year.

Earlier in the day Reuters, quoting unnamed sources, reported that Abu Dhabi has hired JP Morgan Chase and First Gulf Bank to advise on the merger.

Investment Corporation of Dubai (ICD), the flagship holding company which owns stakes in many of Dubai’s top entities, including DFM’s parent, Borse Dubai, has hired Citigroup to advise on the matter, according to the sources.

However, Dubai Financial Market (DFM), informed the regulator with a disclosure note saying, “DFM, as a company [organisation], are not a party that is directly involved in such exchanges and deals, or their possible results.

“As things stand, we do not have any updates that can be disclosed, and therefore, it is difficult for us to either deny or confirm the report published today by Reuters. We would also like to confirm that we did not play a part in the publication of the report, and therefore, it is also difficult for us to speculate on the accuracy or authenticity of information included in the report.”

Cooperation

Talks on a tie-up have been going on and off since 2010 and is one of the reforms that have been voiced by market analysts and fund managers from time to time.

With increasing cooperation between the two emirates in the past one year, the merger between the two bourses gaining traction once again is not surprising.

DFM, the Gulf’s only listed bourse, closed limit up — 14.71 per cent — on the news of advisors being appointed by ADX and Investment Corporation of Dubai.

The Dubai Financial Market General Index surged 2.67 per cent to its highest close since November 2008 at 2829.53. The Abu Dhabi General Index was up 0.64 per cent to 3861.79.
 
One of the sources told Gulf News that Abu Dhabi will likely create a company that holds DFM and they are going to have a partnership of the holding company. 

“The Abu Dhabi entity will buy some part of DFM and DFM will continue to remain as a listed company. The valuation is the key — at what valuation will DFM sell to ADX,” he said.

If and when the merger happens it will provide several benefits, according to fund managers. These would include “greater liquidity, access to a unified investor base for listed companies and possibly synergies resulting in significant cost savings for the combined entity,” said Amer Khan, director at Shuaa Asset Management. Also, he said, it would likely make streamlining and improving regulation a lot easier.

Saleem Khokhar, head of equities at National Bank of Abu Dhabi, said  a merger will create a strong unified UAE exchange attracting more companies to list.

With inputs from Reuters