Sorouh Real Estate Co. and Aldar Properties PJSC surged the most since 2005 after Reuters reported that a final deal on a merger between the Abu Dhabi-based property companies will be signed in the coming weeks.
Sorouh soared 14 percent, the biggest jump since Bloomberg started tracking the shares in December 2005, to 1.58 dirhams at the close in Abu Dhabi. Aldar, the biggest developer in the United Arab Emirates capital, also rallied 14 percent, the most since September 2005, to 1.59 dirhams. The ADX Real Estate Index increased 13 percent, the most on record, helping lift the ADX General Index 0.6 percent. The stocks were the most traded by volume on the Bloomberg GCC 200 Index as of 2:34 p.m. in Dubai.
The companies have reached an initial agreement on a potential merger, Reuters reported, citing three unidentified people familiar with the matter. The final deal will involve a share swap with no cash payment, two of the people were cited as saying. Aldar’s Deputy Chief Executive Officer Mohammed Al Mubarak declined to comment when contacted by Bloomberg News.
“The merger will create one of the largest real estate developers in the country and will enjoy the support of the Abu Dhabi government, either through getting new projects or getting financing,” Nabil Farhat, a partner at Abu Dhabi-based brokerage Al Fajr Securities LLC, said by e-mail. “Investors are optimistic about the merger, and hope that 2013 will mark a turnaround in Abu Dhabi’s real estate market.”
The developers, 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 possible merger with the “blessing” of the emirate’s government. Abu Dhabi bailed out Aldar in 2011 after house prices in the emirate slumped about 50 percent in the aftermath of the 2008 global credit crisis.
Shares of Sorouh rallied 47 percent in 2012 and Aldar’s surged 38 percent, outpacing the Abu Dhabi gauge’s 9.5 percent gain, as investors anticipated news on the merger.
Aldar’s 2012 profit probably doubled to 1.31 billion dirhams ($357 million), according to the average estimate of six analysts compiled by Bloomberg. Sorouh may post a 70 percent advance in net income for the year, the median estimate of four analysts shows.