Emaar, Dubai Properties, Sama Dubai and Tatweer to merge


emaar_logoDubai Holding and  Emaar Properties  said on Friday they are in advanced talks to merge four local real-estate companies.

A joint statement said the move would consolidate Emaar, which is building  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.


  1. Update 1: Dubai talks on Emaar merger

    The company, which is listed on the Dubai Financial Market, has built up cash reserves that are helping it through the downturn.

    Some analysts are therefore reluctant to see it merge with Dubai Properties, Sama Dubai and Tatweer.

    Emaar and Dubai Holding abandoned a land-for-shares swap in 2007 because the deal upset shareholders.

    Many institutional and international investors sold their shares at the time.

    The decision to merge the real estate entities signals an apparent willingness for the ruler to break down the business empires of his lieutenants.

    During the boom years they competed with one another, helping develop the city rapidly but building up the emirate’s $80bn debt.

    Officials have been seeking ways to consolidate some of the emirate’s disparate government-related assets, but have complained that personalities have sometimes slowed down the process.

    Emaar, in which the government has a 32 per cent stake, is run by its chairman, Mohammed Alabbar, while Dubai Holding is overseen by Mr Gergawi, with day-to-day management of the group undertaken by Ahmad bin Byat, its chief executive.

  2. Keeping in mind the resignations of Nasser Al Sheikh from a number of leading positions last week, one could wonder what was his view about this merger plan.

  3. Actually, the official news agency WAM said that :

    Nasser Al Sheikh has been deposed from all his positions even as assistant director general of Dubai Ruler’s Court for Foreign Affairs, the Media Office of HH Sheikh Mohammed bin Rashid Al Maktoum announced today.

  4. In my opinion, if the four companies are going to combine assets (land banks & cash reserves), the shares should be re-valuated or diluted. Action of such capacity will take time, long time (Amlak/Tamweel).

    It is very possible Emaar shares to have had their run already last week.
    The comments in FT.com suggest that certain personalities have been in the the way of high profile companies consolidations in Dubai, which may be linked to the resignations of the last week and the Govn immediate actions.

    If this is so, the news was already discounted and the announcement didn’t come out by mistake on Friday when the markets are closed.

    Centralization, nationalization or whatever it is called, will save lots of administrative expenses and prompt new massive layoffs as well. Also, it indicates the state of the real estate sector and the direction of the property prices and the rents, at least until the end of 2009.

  5. Update 2: Emaar, Dubai Holdings announce consolidation talks


    Mohammed Al Gergawi, chairman of Dubai Holdings, 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. By joining forces, we will give the larger combined entity an unparalleled platform to optimise opportunities in its domestic and international markets. The combined entity has a clear and concise strategy, better positioning Dubai as a world-leading hub in real estate development and management”.

    These entities have begun talks to combine their strengths to create a larger entity that is aimed at ‘rising up to the current challenges’ as well as ‘to transform Dubai into a global city’, a statement issued by Dubai Government, said yesterday.

    “The proposed consolidation comes within the resolute dedication to transform Dubai into a global city since construction and development are a primary engine of growth,” the statement said.

    “Dubai will thus rise up to the current challenges with hallmark agility and responsiveness. The consolidation of these leading real estate entities will not only build on the remarkable achievements in Dubai during the last three decades, but more importantly, marks the start of a new chapter in the annals of real estate globally.”

    If materialises, it could be the biggest consolidation in Dubai’s history to date. The move comes a day after Nakheel – another development giant – said, it was given the operational management of Istithmar, Dubai Maritime City and Dubai Multi-Commodities Centre (DMCC).

    Royal Bank of Scotland PLC is advising Emaar Properties, while Merrill Lynch International is representing the interests of Dubai Holdings, the statement said.

    Dubai Holdings’ entity Sama Dubai owns projects worth more than Dh44 billion in Morocco and a further Dh91 billion in Tunisia.
    Emaar, on the other hand, has more than Dh400 billion worth of projects under various phases of development in Saudi Arabia, Syria, Jordan, Lebanon, Egypt, Morocco, Algeria, Libya, India, Pakistan, Turkey, Indonesia, USA, Canada and the UK.

    Industry analysts see this a positive move that could help boost the market.
    Adel Lootah, executive director of Dubai Property Society (DPS), told Gulf News, “This is a major development. We haven’t seen a decision of such a magnitude for a long time.
    “If I have understood it correctly, then this will create the biggest property developer in the Middle East and North Africa and help these companies manage their businesses better as this will create great synergies.”
    Welcoming the move, he said, it would help strengthen investor confidence in the market.

    Mohammed Ali Al Abbar, chairman of Emaar, said, the move is driven by a shared vision and the creation of a world-class group which would be ideally positioned to dynamically help shape and support the ongoing development of Dubai as a world-leading hub.

    “We look forward to working with Dubai Holdings with a view to completing these discussions soon and ensuring value accretion to our existing shareholders.”

    Four entities to combine strengths

    – The planned consolidation will help the four entities to combine their strengths to create a larger entity that is aimed at ‘rising up to the current challenges’
    – It will also help them ‘to transform Dubai into a global city’
    – Combined portfolio value could reach Dh1.83 trillion ($500bn) as per some estimates.
    – The consolidation will help create synergies and help them fast-track projects
    – The move would strengthen investor confidence in the real estate
    – It will also help solidify Dubai Government’s position as a major player in the economies of the MENA countries
    – Dubai opened its freehold property sector for foreign ownership in 2002.
    – More than 30,000 foreigners currently own homes in Dubai

  6. Update 3: Dubai property mega-merger starts sector consolidation

    The devil will be in the detail, and a four-way merger is bound to be complex. Yet this process is both inevitable and healthy after the collapse of the Dubai property boom last autumn.
    The main problem in concluding this four-way merger will be agreeing asset valuations. It is one thing to trumpet headline project values, quite another to determine the value of a half-completed project whose cash requirements make it an immediate liability and not an asset at all.

    But this is where the common ownership thread is vital, and Emaar is actually 32.5 per cent owned by the Dubai Government as well. The interests of other shareholders also have to be taken into account of course – in the absence of a majority stake – but this is an enormous advantage in driving a complex consolidation to a successful conclusion, creating what will be one of the largest property companies in the world.

    Who runs the merged company?

    There is also the issue of who controls what after the consolidation and the form of the company. Moreover, for Emaar as the listed entity that means determining the extent of dilution to its existing shareholders or facing the creation of an entirely new listed entity.

    But Emaar shareholders are unlikely to assume control of such a huge portfolio of Dubai real estate at no cost to their equity holdings. On the other hand, the potential upside in any recovery will be proportionately greater and the risk-reward ratio could be attractive.

    However, foreign observers will welcome the news that Dubai is grasping this thorny problem now and not allowing the situation to fester further. It could also be that consolidation emerges in other sectors of the local economy: there are four Dubai islamic banks for example that might be more profitable if combined into a single regional champion.