Four months for Dubai property mega merger

The participants in Emaar Properties’ four-way mega merger have set a tight timetable of just four months to complete the deal. Publicly listed Emaar is lining up to merge with Dubai Government companies Dubai Properties, Sama Dubai and Dubailand developer Tatweer.

A statement from Emaar said the four-month timetable would include: ‘due diligence of the entities, a detailed valuation exercise, completion of legal documentation, agreement with regulatory authorities in respect of the structure and the process, and shareholders’ approval’.

Summer business

That sounds like a lot of cancelled holidays for Dubai bankers, property valuers, lawyers and accountants. But after a very thin recent business period they will doubtless be delighted to rise to the challenge.

The key valuation exercise appears the most daunting in the current market environment where asking and selling prices are not necessarily the same thing, and where sales are tough to achieve for single properties let alone whole portfolios.

However, the argument here is for a level playing field. So long as all the property is valued in the same way, across all four entities, then the nominal value is not important in deciding share allocations. The parties say they intend to finish this process by August.

Then there will be a hot month for lawyers to complete the documentation by September ready for submission to the regulators in October after Ramadan. Emaar shareholders will finally vote on the deal in October if all goes to schedule.

Emaar shares

Trading in Emaar stock has not been suspended. Market observers expect the Dubai bellwether stock to trade sideways, awaiting news on the merger.

Optimists might choose to buy before the deal in anticipation of a merger to the advantage of Emaar. It is, after all, logical to assume that in the present difficult real estate market in Dubai that terms are going to be advantageous to the listed concern.

But at the same time, Dubai will be looking to regain some of the lost value in its projects from a meaningful merger valuation – reflected in a higher equity stake – as well as from longer term share price appreciation. Yet it is clear that maximizing the value of the combined entity will be to the long term interest of all parties.

However, ultimately the outlook for Dubai’s increasingly oversupplied property market will depend on a global economic recovery and higher oil price, two factors taxing the finest minds these days without a clear conclusion.