Emaar's end to merger plans a 'sign of the times'

Analysts and shareholders welcomes Emaar Properties' cancellation of its plan to merge with three property units of Dubai Holding and called it a sign of the times in the regional real-estate market. "If it went through, it would have been the biggest developer in the region. But right now we have moved away from being the bigger, the best and all these labels," said Ayman al Saheb, the director of operations of Darahem Financial Brokerage.

"This decision was expected because right now there are liquidity issues. So coming up with a company that is already indebted is not a good equation at the moment." In announcing that its board had decided to scuttle the merger, Emaar said studies "have confirmed that the merger plan that was proposed doesn't make economic for such a move at the time being". Emaar, the largest developer in the UAE, had announced in June that it planned to merge with three Dubai Holding units, Dubai Properties, Sama Dubai and the leisure developer Tatweer. After announcing the cancellations, Emaar shares yesterday jumped 15 per cent to Dh2.94 (80 US cents), the maximum allowed by the Dubai exchange and their largest gain since November last year.

Mr al Saheb was concerned about the lack of information regarding Dubai Holding assets. "Dubai Holding is not a listed company and we have no financial data." Emaar is about 30 per cent government owned, while Dubai Holding is a diversified business group owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai. "Also, what they have in terms of assets is mainly land," Mr al Saheb said. "One would question the fair value of land at present."

Nakheel, the company behind Dubai's man-made palm islands, had to recently writedown the value of land of some properties under construction by Dh12.2 billion. The cancellation "is positive news for shareholders", said Sajeer Babu, an analyst at the National Bank of Abu Dhabi. "We as a shareholder were rather against this merger. "Emaar is in a relatively better position compared to other Dubai companies if you look their debt profile, their expansion plans, their asset base."

Mr Babu said Emaar, on a stand-alone basis, is in a good position. "It is also the only company that has exposure outside Dubai," he said. "They are in India, Saudi Arabia, Turkey, Egypt. And all these markets are growing at a faster pace than the rest of the world. They are highly diversified." Martin Kohlhase, an analyst at Moody's Investors Service, said, "I think it is probably better for the equity investors of Emaar given that they would have become a minority under the proposed structure."

Charles Neil, the chief executive of the property consultant Landmark Properties, said he does not believe the news "will have any impact on property prices". Iseeb Rehman of the property brokerage Sherwoods International said he does not think the cancellation will have much impact on Dubai Holding projects. "It will keep things just more transparent, though," he said. "Dubai Holdings is still a private entity. They will get restructured. It is probably better because it will keep them separate and more transparent."

Emaar is one of six Dubai companies cut by Moody's earlier this week, along with Jebel Ali Free Zone and Dubai Holding Commercial Operations Group. Emaar's rating was reduced two levels to "B1", four notches below investment grade. @Email:ngillet@thenational.ae