DUBAI, United Arab Emirates (AP) — Aldar Properties, the struggling Abu Dhabi real estate developer, said Sunday it is launching talks with its smaller rival, Sorouh Real Estate, about a possible merger.
It would be supported by the Gulf emirate’s government.
The proposed tie-up would unite the Emirati capital’s two most prominent property developers as they grapple with a deep property slump that has gripped the United Arab Emirates since prices peaked in 2008.
Aldar already received some $10 billion in government aid through two bailout rounds last year.
It is majority owned by the Abu Dhabi government and was a key driver of the sheikdom’s development, including its signature project, Yas Island, home of the Abu Dhabi Grand Prix auto race.
The companies outlined plans for the possible merger in brief statements to the emirate’s stock exchange. They said the negotiations carry “the blessing of the government of Abu Dhabi,” though they did not outline what financial support, if any, the state would provide.
It was not immediately clear how the deal would be structured.
Haissam Arabi, chief executive and fund manager at Gulfmena Investments in Dubai, said a merger could benefit both companies.
“The combined entity would make a mega-master developer with solid financials and government backing,” Arabi said. Abu Dhabi might be willing to provide additional financial support to the merged company if needed, he added.
A working group will be formed to study the legal and commercial implications of the proposed merger. It is expected to make recommendations to senior management of both developers within three months, the companies said.
Abu Dhabi’s property market, like that of neighboring Dubai, was hammered as the worldwide financial crisis took hold in 2008. Analysts estimate property prices plunged by half in the Emirati capital, though new high-rises continue to be built.
Abu Dhabi is the largest and richest of the seven states that make up the UAE, an OPEC member that is the Arab world’s biggest economy after Saudi Arabia.