Abu Dhabi picks banks for realty merger talks
Abu Dhabi, May 21, 2012
Abu Dhabi picked Goldman Sachs and three other banks as financial advisers on the state-backed merger of the emirate's two largest property firms, four sources said on Monday, adding momentum to the process.
Aldar Properties and Sorouh Real Estate said in March they were in talks for a potential merger, with the blessing of the government, creating a company with $15 billion in assets.
Abu Dhabi also picked Morgan Stanley and Credit Suisse to advise the two companies on the deal, banking and industry sources said on condition of anonymity.
Aldar is being advised by the Swiss lender while Morgan Stanley will aid Sorouh, one of the sources said.
National Bank of Abu Dhabi, majority-owned by the government, will join Goldman to advise the steering committee overseeing the potential merger, a second one of the sources familiar with the matter said.
'This is a crucial step in taking the merger forward. The fact that they have got some high-profile banks there shows the willingness to take this merger forward in a systematic manner,' said one of the banking sources.
Analysts say the deal is aimed at shoring up the balance sheet of Abu Dhabi sovereign wealth fund Mubadala, which has a big stake in struggling Aldar, and stabilising the emirate's brittle real estate market.
Aldar has relied heavily on the government over the past 18 months for funding. Abu Dhabi has spent more than $10 billion on the company, equivalent to the amount it deployed to rescue Dubai from a bond default in 2009.
Shares of Aldar and Sorouh closed up 4.9 percent and 5.1 percent respectively on the Abu Dhabi bourse on Monday. Several global banks had pitched for the advisory mandate, which was seen as a way to open more lucrative doors in the oil-rich emirate.
A tie-up between Aldar and Sorouh is seen as complicated, however, given the massive land banks the two companies hold and the work involved in arriving at a deal structure.
'The process is definitely complicated but this could well be one which we will see through since there is clear government backing,' said the source.
The steering committee, banks and companies are expected to meet later this week to discuss the deal, one source said. In 2009, Dubai abandoned plans to merge four of its realty firms including Emaar Properties after feasibility studies.-Reuters