Abu Dhabi: The boards of Aldar Properties and Sorouh Real Estate have recommended a merger of two of Abu Dhabi’s largest property developers that would lead to the creation of a new company having total assets of more than Dh47 billion and enabling the entity to become one of the largest listed real estate companies in the region.
As well, the Monday’s move paves the way for the second-biggest corporate merger in UAE’s history after Emirates Bank International and National Bank of Dubai merged a few years ago to create one of the Middle East’s largest banks with assets of Dh165 billion.
In a joint statement yesterday, Aldar and Sorouh said the merger was unanimously recommended to shareholders by their respective boards. In what would be an all-share merger, Sorouh shareholders will receive 1.288 Aldar shares for every Sorouh share they hold.
The new company will be named Aldar Sorouh Properties having a combined market capitalisation of approximately Dh10.9 billion, based on closing share prices on January 17, 2013. Upon the merger becoming effective, shareholders of Sorouh will become shareholders in Aldar Sorouh, the Sorouh shares will be delisted from the Abu Dhabi Securities Exchange and Sorouh will be dissolved, the statement added.
“The merger is subject to a number of conditions, including the approval of the merger by at least 75 per cent by value of the shares represented at quorate extraordinary general meetings of Aldar and Sorouh. Under the proposed terms of the merger, the government of Abu Dhabi and related entities will own approximately 37 per cent of the combined company on a fully-diluted basis,” said the statement. “It is currently anticipated that, subject to the satisfaction of these conditions, the merger will become effective in June 2013.”
Aldar’s shares listed on the Abu Dhabi Securities Exchange plunged on the news, closing 9.82 per cent lower at Dh1.47. Sorouh’s shares, meanwhile, surged, the stock closing 4.29 per cent higher at Dh1.70.
Commenting on the proposed merger, Marwan Shurrab, Vice President at Dubai-based GulfMena Investments told Gulf News: “The new entity will enjoy expansion of assets and expansion of market share as well as strong government backing that was enjoyed by Aldar, previously.”
Upon completion of the merger, the total issued share capital of Aldar Sorouh will be 7,466 million shares. Following the issue of the new Aldar shares, Sorouh shareholders would own approximately 45.3 per cent of the combined company and Aldar shareholders would own approximately 54.7 per cent. Once the remaining convertible bonds issued by Aldar to Mubadala Development Company are converted into equity in full, the relative ownership of Sorouh and Aldar shareholders will be 43 per cent and 57 per cent, respectively.
“The (merger recommendation) announcements today surprised the markets. The markets were anticipating the valuation of Aldar to be higher than Sorouh. The premium on the valuation of Sorouh’s stock price was 28.8 per cent. That’s why Sorouh’s stock moved higher during the day, while Aldar’s stock moved downwards as investors exited the stock to buy more Sorouh shares,” Mohammad Ali Yasin, Managing Director of NBAD Securities told Gulf News.
He added: “However, that shall not be the case, always. The market will take a few sessions to digest the news and after that, we will see both stocks trading with the band of the valuation.”
Sorouh announced yesterday that it is has agreed to a transaction of Dh3.2 billion under which the government of Abu Dhabi will reimburse it to the tune of Dh1.6 billion for certain infrastructure assets and a further Dh1.6 billion for the purchase of units in The Gate development.
The boards of Aldar and Sorouh believe that the combined business will offer significant benefits to all stakeholders. This would bring together two complementary businesses that will have a more diversified and balanced asset portfolio, a strong balance sheet, visible high quality earnings, better access to capital markets and synergies of up to Dh110 million per annum by 2015. Customers will benefit from a broader product suite across a range of assets within the Emirate of Abu Dhabi.