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A joint statement said the move would consolidate Emaar, which is buildingÂ Burj Dubai, with three developers owned by Dubai’s ruler — Dubai Properties, Sama Dubai, and leisure developer Tatweer — that are all prominent players in a sector badly hit by the global financial crisis.
Emaar’s shares closed at 3.21 dirhams ($0.87) on Thursday, well off their 28.75 dirham high, reached in September 2005. Reuters data showed Emaar’s enterprise value was 23.9 billion dirhams, and that it had net debt of 3.8 billion dirhams.
Property prices in Dubai have slumped since last year when the global economic crisis and a drop in oil prices ended an economic boom in the Gulf region.
“Emaar and Dubai Holding … with the assistance of their financial advisers, the Royal Bank of Scotland PLC and Merrill Lynch International respectively, are in the process of finalizing a thorough assessment of the merits of this proposed consolidation,” the statement said.
The assessment covers areas including “the valuation of the various entities as well as … the potential transaction structures,” it said.
“Consolidating these three companies with Emaar is a natural progression in the evolution of the Dubai real estate landscape, providing benefits to all stakeholders,” Mohammed al-Gergawi, chairman of Dubai Holding, said in the statement.
Emaar Chief Financial Officer Amit Jain and Emaar Dubai Holding’s Chief Executive, Issam Galadari, declined to comment when contacted by Reuters.
Executives at Dubai Properties, and Sama Dubai could not immediately be reached for comment. Saaed al Muntafiq, executive chairman of Tatweer, declined to comment.
“Given the sharp drop in project pipeline it is a good idea to right size Dubai Holding businesses exposed to various projects,” said Saud Masud, real estate and construction analyst for the Middle East and North Africa at UBS.
“The merger is the right thing to do. It is a much needed catalyst and could lead to bigger M&A activity.”
Earlier this week, Peter Riddoch, chief executive of Damac Properties, the emirate’s largest private developer, told the Reuters Global Real Estate Summit in London he believed prospects for consolidation in Dubai remained high as the government looked to support its property firms.
Tatweer said earlier this month the bankruptcy of its partner Six Flags SIXF.OB, one of the largest theme park operators, would not delay a multi-billion dirham park project in Dubai.Tatweer is building at lease seven theme parks.
Dubai Holding said in February it would merge back-office operations at Dubai Properties, Sama Dubai and Mizin to cut costs.