Abu Dhabi's Eshraq Properties drops merger plans with Reem Investments

Eshraq Properties has dropped plans to merge with fellow Abu Dhabi developer Reem Investments, after the two companies could not agree on the terms of the transaction, the company said on Tuesday.

"The strategic investment of Reem Investments in Eshraq Properties will not be completed," Eshraq board said in a statement to Abu Dhabi Securities Exchange, where its shares are traded. "Further to discussions and deliberations, the parties have not been able to agree on major commercial matters underpinning the deal," the company said without giving further details.

Eshraq, which has a market capitalisation of Dh2.325 billion and privately-held Reem Investments, with a paid-up capital of Dh1.55bn announced a possible consolidation of their holdings in 2017, in a deal that would have created the emirate’s second-largest listed developer.

The announcement, in August last year, came amid a flurry of consolidation activity in Abu Dhabi among financial and government entities to streamline costs to offset the impact of lower oil revenues.

The parties at the time said that talks were at an “advanced stage” for the potential deal, which was expected to see Reem Investments subscribing to a new share issuance by Eshraq, which would then acquire the entirety of the developer’s business and assets. The firms had specified conditions for the deal to proceed, with pricing and regulatory approvals being the more prominent clauses.

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Dubai investment bank Shuaa Capital was said to be advising Eshraq on the deal, while Reem had sought First Abu Dhabi Bank to help with the transaction.

Eshraq, which is also the founding shareholder of Etihad Reit, a Shariah-compliant real estate investment trust, with plans to list on one of the UAE exchanges, has a diverse portfolio of properties. Reem Investments, on the other hand, is a master developer and holds assets in locations including the Najmat on Al Reem Island and Rawdhat on Old Airport Road in the capital.

While the planned Eshraq-Reem deal eventually did not materialise, other efforts at real estate consolidation in Abu Dhabi were successful. Aldar Properties, Abu Dhabi's biggest-listed developer with $10bn in assets, in May reached an agreement with Tourism Development & Investment Company to acquire real estate assets worth Dhs3.7bn, making it one of the largest mergers in the sector in the UAE’s history.

The Aldar deal followed further consolidation in Abu Dhabi's financial sector, which saw the state-owned Mubadala Investment Company and Abu Dhabi Investment Council join forces to pool their assets in March.

The Merger of two biggest lenders in the capital - National Bank of Abu Dhabi and First Gulf Bank to create FAB - was the biggest such deal last year.  Abu Dhabi's education sector also saw consolidation with Khalifa University, the Petroleum Institute and the Masdar Institute merging into one institute in October last year.