DUBAI,(Reuters) – UAE-based Emaar Properties, the largest Arab real-estate developer by market value, said on Sunday it agreed to swap 2.364 billion of new shares for land with a firm owned by the ruler of Dubai.
Emaar and Dubai Holding, in a joint statement, did not give a value for the transaction or details about the land in the United Arab Emirates sheikhdom.
Based on Thursday’s closing share price, the new stocks would be worth 27.9 billion dirhams ($7.6 billion). The company’s shares were up 0.42 percent at 0842 GMT, after early rising as much as 1.69 percent.
“We see exceptional synergies between Emaar and Dubai Holding in high-growth sectors, including real estate, hospitality, healthcare, education finance and industry,”
Mohamed Alabbar, Emaar’s chairman, is quoted as saying in the statement.
“Both Emaar and Dubai Holding will enjoy greater economies of scale, (and) extract improved cost structures from our construction contractors and suppliers,” Alabbar said, without giving details. A spokeswoman for Emaar could not immediately comment when reached by telephone.
Emaar has 6.096 billion shares outstanding, of which the Dubai government owns 32 percent. Dubai Holding’s stake in the expanded shareholding is 27.9 percent, giving Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum and his government a combined 51 percent.
“It effectively gives the government of Dubai, in its different entities, control of the company,” said Tamer Bazzari, director of Dubai-based Rasmala Investments, which manages about 2 billion dirhams of assets, including in Arab markets.
“It increases Emaar’s exposure to Dubai. The key question is at what valuation Emaar got the land,” said Bazzari.
Dubai Holding Chief Executive Officer Fadel Ali declined to comment when contacted by Reuters. Mohammad al-Gergawi, executive chairman of Dubai Holding, could not immediately be reached on his mobile phone.
Emaar, which bought U.S. homebuilder John Laing Homes in June, is expanding outside its Dubai hub with $60 billion of developments in 14 countries, including Saudi Arabia, Pakistan, Egypt and India.
Still, the 10-year-company relies on revenue mainly from Dubai, when it began with free land from the government, said Nemat Choucri, real estate and construction analyst at Cairo-based investment bank, HC Securities and Investments.
“By 2010, Emaar’s land bank in Dubai will be fully developed and revenues after that will be solely from rental income,” Choucri said. The agreement with Dubai Holding will give Emaar “more major development projects in Dubai,” she said.
Sales income from Dubai, where Emaar is developing landmarks, including a $20 billion project it says will have the world’s tallest building, accounted for about 90 percent of Emaar’s revenue last year, she said.
HC, which manages 3.6 billion Egyptian pounds ($631.9 million) of assets, initiated coverage of Emaar in February with a “strong buy” recommendation.
Emaar shares had fallen 5.5 percent after the company proposed a 20 percent cash dividend for 2006 on March 11, disappointing investors.
Nationals of countries other than the UAE, Saudi Arabia and four other Gulf Arab states are allowed to own as much as 49 percent of Emaar.
Dubai aims to grow its economy 11 percent a year until 2015, Sheikh Mohammed said in February.