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Aldar, Sorouh Drop on Bets Merger to Disappoint: Abu Dhabi Mover

Aldar Properties PJSC and Sorouh Real Estate Co. dropped in Abu Dhabi on concern the terms of a possible merger between Abu Dhabi’s biggest property companies may dilute their shareholdings.

Aldar, the emirate’s largest developer, declined 2.3 percent, the most since Sept. 18, to close at 1.29 dirhams. The stock tumbled 5.2 percent this week. Sorouh also fell 2.3 percent, the most since June 12, to 1.29 dirhams, bringing the drop for the past five days to 3 percent. Discussions on a merger are at an “advanced stage,” the companies said yesterday, without elaborating.

The two real-estate companies, which have played an integral part in Abu Dhabi’s drive to turn itself into a tourism and business hub, said in March they are studying a merger with the “blessing” of the emirate’s government. Investors are concerned the transaction’s terms could dilute their shareholding, said Nabil Al Rantisi, managing director of brokerage at Abu Dhabi-based Menacorp.

“The terms of the merger deal are not clear yet, and investors initially thought it was almost done,” he said.

The stocks were the third and fourth most-traded by volume on the benchmark ADX General Index, which slipped 0.1 percent today. Aldar, whose shares have surged 40 percent this year in anticipation of the merger, had expected a decision on the plan by the end of October, Deputy Chief Executive Officer Mohammed Al Mubarak said Oct. 1. Sorouh’s stock is up 52 percent, outpacing the Abu Dhabi gauge’s 11 percent gain.

Awaiting Outcome

NBK Capital maintained the suspension of its coverage of Sorouh “pending the outcome of the merger,” analysts including Loic Pelichet said in an e-mailed note dated yesterday.

Abu Dhabi, the capital of the United Arab Emirates, bailed out Aldar last year after house prices slumped about 50 percent in the aftermath of the 2008 global credit crisis. An Aldar spokesman wasn’t immediately available for comment yesterday, while a spokesman at Sorouh declined to comment.

The developers posted gains in third-quarter profit yesterday, with Aldar’s rising 43 percent and Sorouh’s surging 85 percent. Sorouh has a price-to-earnings ratio of 7.33 times and a market value of 3.39 billion dirhams, compared with a price-to-earnings of 4.45 times for Aldar and a market capitalization of 5.27 billion dirhams.

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