Emaar May Combine With Three Units of Dubai Holding

26 June 2009
Bloomberg
By Zainab Fattah

Emaar Properties PJSC, the Middle East’s biggest property developer, is in talks to combine with three state-controlled competitors after a slump in Dubai’s property market eroded earnings.

Dubai-based Emaar may merge with Dubai Properties LLC, Sama Dubai LLC and Tatweer LLC, units of Dubai Holding LLC, according to an e-mailed statement today. The transaction could generate “exceptional” cost savings, Emaar Chairman Mohammed Alabbar said in the statement.

Dubai's real-estate industry was hurt more than others by the global financial crisis. Home prices have tumbled by about 50 percent from their peak and may drop another 20 percent this year, Deutsche Bank AG said on June 10. The market’s collapse followed a construction boom that created thousands of homes just as demand began to evaporate.

"Emaar has officially signaled that there is a glut in the market and need for consolidation,” Saud Masud, a Dubai-based analyst at UBS AG, said by telephone today. “We may see other developers follow suit in the next several quarters."

The slump in Dubai’s property market, where Emaar generates about 84 percent of its revenue, caused the developer’s first- quarter profit to tumble 74 percent. The shares dropped 4.5 percent to 3.21 dirhams yesterday, paring this year’s gain to 42 percent and giving the company a market value of 19.6 billion dirhams ($5 billion).

Dubai Holding is also based in Dubai and is owned by the emirate’s ruler, Sheikh Mohammad bin Rashid al-Maktoum. Royal Bank of Scotland Group Plc and Merrill Lynch & Co Inc. are advising on the transaction.