Aldar and Sorouh in 'advanced' merger talks

Aldar Properties and Sorouh Real Estate, Abu Dhabi's biggest property developers, confirmed yesterday their long-running merger discussions have reached an "advanced stage".

The statement, posted on the Abu Dhabi Securities Exchange yesterday morning, follows a flurry of rumours this week suggesting the deal could be completed next month.

There are "ongoing due diligence discussions to evaluate the merits of a potential merger … a decision on whether to recommend a merger to shareholders will follow the completion of these discussions", the companies said.

The merger, valued at Dh47 billion (US$12.79bn), was announced in March with the blessing of the Abu Dhabi Government. If the deal goes ahead, it would create the largest property development company in Abu Dhabi.

Shares of the two increased after the announcement. Sorouh shares rose 0.8 per cent to Dh1.25 each and Aldar enjoyed a 0.7 per cent rise to Dh1.32.

A decision on the proposed merger has been expected since June, when a joint committee of both boards was set up to assess the legal and commercial viability of the deal.

"We have never seen such a large merger in the [property] market, said Matthew Green, the head of research and consultancy at CBRE."It will make them a stronger organisation and hopefully will be complementary."

Aldar is the developer behind the Yas Marina Formula One Circuit, while Sorouh built Reem Island's Sun and Sky Towers. Sorouh is also the developer of a building complex where a courtyard collapsed on Sunday. It is not immediately clear what was the cause.

"Overall the Abu Dhabi real-estate market is going through a transition period. Rent prices continue to drop, there is deflation across the market but on the positive side the new government regulation changes should have a knock-on effect next year. We can expect demand levels to rise and see more stability in 2013," Mr Green said.

thamid@thenational.ae