Aldar headquarters. Image: hainaultphoto / Shutterstock.com
Aldar, Sorouh in due diligence on merger
Abu Dhbai, June 10, 2012
Due diligence process is underway on the potential state-backed merger of indebted Abu Dhabi developer Aldar Properties and smaller rival Sorouh Real Estate, the two firms said, also naming financial advisors for the deal.
Aldar and Sorouh said in March they were in talks for a potential merger, with the blessing of the government, potentially creating a company with $15 billion in assets.
Goldman Sachs and National Bank of Abu Dhabi are advisors to the steering committee overseeing the proposed tie-up between Abu Dhabi's top two developers, the companies said in a joint bourse statement. Credit Suisse is advising Aldar while Morgan Stanley will work with Sorouh.
'A due diligence process is now underway to assess in detail the implications for all stakeholders and this process will take a number of months,' the statement from the companies said.
Reuters reported in May that those banks had been appointed to the roles, adding momentum to the state-backed deal. Ernst&Young will provide accounting advice to the steering committee while property consultants Jones Lang LaSalle will help with valuations.
Aldar, which has relied heavily on the government over the past 18 months for funding, also appointed Allen & Overy as the legal advisors.
The builder of the Yas Marina Formula One motor racing circuit received as much as $10 billion in rescue funds from the government. This is equivalent to the amount Abu Dhabi deployed to rescue Dubai from a bond default in 2009. Sorouh, which is the smaller among the two firms, appointed Clifford Chance as legal advisors, the statement added.
Shares of Aldar and Sorouh closed up 1.8 percent and 1 percent respectively on the Abu Dhabi bourse on Sunday, before the announcement.
Abu Dhabi's property market is facing challenges as a huge supply of high-end homes are expected to enter the market this year. Property prices in the emirate are expected to fall another 5 percent in 2012, a Reuters poll showed. - Reuters