Aldar shareholders, being pegged as the winners in a proposed merger with Sorouh, may find the tables are turned on them once a deal is announced, say analysts.
Bank of America Merrill Lynch projects that a combined entity with a market cap of US$2.45 billion (Dh8.9bn) would give a merger ratio of 1.56 times, or one Aldar share for every 1.56 Sorouh shares.
Aldar and Sorouh have yet to announce the actual merger ratio. But if the US bank’s prediction is correct, Aldar’s stock is the more valuable of the two companies.
Its shareholders would get one share in the merged entity for each one they hold, whereas Sorouh shareholders would get only one new share for every 1.56.
However, analysts have viewed the bank’s assessment with caution. Mohammed Al Yasin, an independent analyst, said on book value – the net asset value of a company – Sorouh was the better bet.
“Sorouh should be a higher price than Aldar in my mind.
“In terms of assets the two companies are about the same, but Sorouh’s book value is 2 compared to Aldar’s 1.75. Also Aldar’s liabilities are about three times that of Sorouh,” he said.
Shares in both have been trading at parity or very near parity since two weeks before the merger was announced. The lockstep in prices of the two firms implies investors believe a merger will happen on a 1 to 1 basis, where investors swap their Sorouh and Aldar for the same number of shares in the new company.
Mr Yasin said the parity partly represented investors hedging their bets until details of the merger were made public. “People are unsure what any merger valuations will be so they are buying both, which is keeping the share price the same.”
Under Bank of America’s valuation, Aldar and Sorouh’s shares should have been trading at Dh1.99 and Dh1.28 respectively after the merger announcement on March 11. However, both stocks closed at Dh1.34 the following day.
Today both companies’ shares are still trading away from the bank’s valuation – with Aldar at Dh1.32, and Sorouh at Dh1.28. But if the bank’s figure is correct, the current closeness of the share prices offers a buying opportunity.
Shares in Aldar and Sorouh both closed at identical prices on three consecutive days before they announced they were weighing up a merger.
Prior to this, Aldar had been trading at a premium of 10 per cent to its smaller rival Sorouh.
Shares in both companies closed down yesterday. Sorouh fell 6.47 per cent to Dh1.30; Aldar dropped 5 per cent to Dh1.33.
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Famous left-handers
- Marie Curie
- Jimi Hendrix
- Leonardo Di Vinci
- David Bowie
- Paul McCartney
- Albert Einstein
- Jack the Ripper
- Barack Obama
- Helen Keller
- Joan of Arc
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
A Bad Moms Christmas
Dir: John Lucas and Scott Moore
Starring: Mila Kunis, Kathryn Hahn, Kristen Bell, Susan Sarandon, Christine Baranski, Cheryl Hines
Two stars
How to invest in gold
Investors can tap into the gold price by purchasing physical jewellery, coins and even gold bars, but these need to be stored safely and possibly insured.
A cheaper and more straightforward way to benefit from gold price growth is to buy an exchange-traded fund (ETF).
Most advisers suggest sticking to “physical” ETFs. These hold actual gold bullion, bars and coins in a vault on investors’ behalf. Others do not hold gold but use derivatives to track the price instead, adding an extra layer of risk. The two biggest physical gold ETFs are SPDR Gold Trust and iShares Gold Trust.
Another way to invest in gold’s success is to buy gold mining stocks, but Mr Gravier says this brings added risks and can be more volatile. “They have a serious downside potential should the price consolidate.”
Mr Kyprianou says gold and gold miners are two different asset classes. “One is a commodity and the other is a company stock, which means they behave differently.”
Mining companies are a business, susceptible to other market forces, such as worker availability, health and safety, strikes, debt levels, and so on. “These have nothing to do with gold at all. It means that some companies will survive, others won’t.”
By contrast, when gold is mined, it just sits in a vault. “It doesn’t even rust, which means it retains its value,” Mr Kyprianou says.
You may already have exposure to gold miners in your portfolio, say, through an international ETF or actively managed mutual fund.
You could spread this risk with an actively managed fund that invests in a spread of gold miners, with the best known being BlackRock Gold & General. It is up an incredible 55 per cent over the past year, and 240 per cent over five years. As always, past performance is no guide to the future.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Know before you go
- Jebel Akhdar is a two-hour drive from Muscat airport or a six-hour drive from Dubai. It’s impossible to visit by car unless you have a 4x4. Phone ahead to the hotel to arrange a transfer.
- If you’re driving, make sure your insurance covers Oman.
- By air: Budget airlines Air Arabia, Flydubai and SalamAir offer direct routes to Muscat from the UAE.
- Tourists from the Emirates (UAE nationals not included) must apply for an Omani visa online before arrival at evisa.rop.gov.om. The process typically takes several days.
- Flash floods are probable due to the terrain and a lack of drainage. Always check the weather before venturing into any canyons or other remote areas and identify a plan of escape that includes high ground, shelter and parking where your car won’t be overtaken by sudden downpours.
The National in Davos
We are bringing you the inside story from the World Economic Forum's Annual Meeting in Davos, a gathering of hundreds of world leaders, top executives and billionaires.
Squid Game season two
Director: Hwang Dong-hyuk
Stars: Lee Jung-jae, Wi Ha-joon and Lee Byung-hun
Rating: 4.5/5
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The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
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