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Peter Cooper is the editor and publisher of the ArabianMoney Investment Newsletter and website. He was formerly a partner in, sold in a private equity deal in 1996. His book 'Opportunity Dubai: Making a Fortune in the Middle East' was a best seller, and his latest... More
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Dubai Sabbatical: The Road to $5,000 Gold
  • Dubai property mega-merger starts sector consolidation 5 comments
    Jun 27, 2009 12:55 AM

     News that publicly listed Emaar Properties has started merger talks with three Dubai Government owned property companies – Dubai Properties, Sama Dubai and Tatweer – is to be welcomed as the beginning of a necessary consolidation of the sector.

    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.

    Crisis-hit advisers

    Emaar will be advised by Royal Bank of Scotland, itself now partly nationalized as a result of the financial crisis, and the Dubai Government companies by Merrill Lynch, now part of Bank of America after a forced banking consolidation.

    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.

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Comments (5)
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  • Dubai Property
    , contributor
    Comment (1) | Send Message
    They say that the market will go up end of this year, and if ever this merger pushes through. It's an added help.
    27 Jun 2009, 03:12 AM Reply Like
  • Ann Julie
    , contributor
    Comments (2) | Send Message
    Every big and medium sized companies are looking for mergers to survive as the load of debts and less work is too much to bare alone. These companies are doing their best to survive, due to this economic stability will be assured.
    11 Aug 2009, 09:42 AM Reply Like
  • Gold Bug.
    , contributor
    Comments (76) | Send Message
    Dubai One Year On from the Credit Crunch and the Bubble Burst a BBC Video Report
    Watch :
    17 Oct 2009, 04:49 AM Reply Like
  • dubai rent
    , contributor
    Comments (54) | Send Message
    Dubai Boom will return again If dubai Government thinks sincerely about his future otherwise all world knows about its recent down fall.

    21 Jan 2011, 02:21 AM Reply Like
  • burjreseo
    , contributor
    Comment (1) | Send Message
    Great article.. Dubai's real estate sector is ever growing with their awesome buildings and structures and great place to live.. Investment in real estate is a great business in Dubai. I invest with Sloanes real estate brokers in Dubai, they provide exclusive apartments, real estates in burj khalifa and villas in Dubai.
    5 Dec 2014, 07:52 AM Reply Like
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