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Emaar Properties plans big merger

THE Dubai developer behind the world's tallest building plans to merge with three rivals owned by the sheikdom's ruler, in a consolidation aimed at coping with a global meltdown that fueled weakness in the one-time Arab boomtown's real estate sector.

In a statement posted yesterday on the Dubai Financial Market's Website, Emaar Properties PJSC said its proposed merger with Dubai Holding subsidiaries Dubai Properties LLC, Samar Dubai LLC and Tatweer LLC would create a company with an asset base of 194 billion dirhams (US$52.8 billion) and a debt of 13.4 billion dirhams.

"The proposed consolidation would create a robust and strategic asset base while joining the strengths" of the various companies, Emaar said.

The deal, first outlined over the weekend in a release by Emaar, marks a push to shore up a Dubai property market that has seen values plunge by as much as 40 percent in the first quarter of 2009 as the global economic meltdown hit the sheikdom hard.

Layoffs in Dubai's largely expatriate work force compounded the oversupply of units in the semiautonomous city-state, squeezing prices.

Rumors surface

The tougher financing climate also led to project delays and cancellations, and the fallout from the overall economic weakness further tarnished the image of an emirate whose famed man-made islands, soaring skyscrapers and rampant consumerism helped cast it as a rising global business powerhouse.

As the credit crunch worsened over the second half of 2008, rumors surfaced about Emaar eying a merger with government-run rival Nakheel - talk that the companies and the government denied.

But discussions of consolidations continued, built on expectations that companies would need to adopt some sort of measures - beyond the bailouts afforded by the Dubai government - to cope with the difficult business climate.

"These comprehensive discussions are driven by a shared vision regarding the consolidation of our respective visible success stories to date and the creation of a world-class group which would be ideally positioned to dynamically help shape and support the ongoing development of Dubai as a world-leading hub," Emaar Chairman Mohamed Alabbar said in a statement.

The companies released few details - including about valuation - saying only that the merger process would take roughly four months. The Royal Bank of Scotland and Merrill Lynch were retained as the financial advisers for Emaar and Dubai Holding, respectively.

Analysts saw it as a strategic move for both Emaar and the Dubai property sector.


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