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Damac IPO Will Value Homebuilder at as Much as $3.7 Billion

Damac Real Estate Development Ltd. said its U.K. initial public offering will create a homebuilder with a market value of as much as $3.7 billion.

Al Firdous Holding and Sahira Co., controlled by Damac founder Hussain Sajwani, will offer depositary receipts in Damac for $12.25 to $17.25 each, according to a statement today. The sale of as much as 18.8 percent of the company will raise at least $500 million and the market value will be a minimum of about $2.7 billion, the statement showed.

The IPO will be the first by a Dubai-based developer since the sheikhdom’s property market started to recover from one of the world’s worst property crashes in 2008. Damac was valued by analysts at $3.9 billion to $5.4 billion, three people briefed on the process said on Nov. 4.

“The valuation range seems reasonable and the fundamentals are attractive, especially on the lower end of the range,” said Taher Safieddine, an analyst at Shuaa Capital PSC. The valuation may have been reduced to attract buyers, he said.

Damac may offer an additional 15 percent in the IPO by using a so-called over-allotment option.

Damac’s Projects

Damac started projects including Hollywood-themed apartment towers and a Trump International golf course this year. Dubai’s home prices soared at the fastest pace in world during the second quarter, prompting the government to double property transaction fees to rein in speculation.

Damac has assets valued at $2.3 billion and it generated a first-half profit of $332 million, up from $212.1 million in all of 2012, according to a Nov. 4 filing. Gross profit margins averaged 44 percent in the three years through 2012 and 64 percent in the first half of this year, the filing said.

Citigroup Inc. and Deutsche Bank AG are managing the sale.

“I’m disappointed that a company from the United Arab Emirates chooses to have London for its main listing,” said Sanyalaksna Manibhandu, senior analyst at NBAD Securities LLC. “It doesn’t make sense to me.”

Dubai’s benchmark stock index surged 74 percent this year while Abu Dhabi’s gained 44 percent. MSCI, whose equity indexes are tracked by investors with about $7 trillion in assets, will upgrade the gauges from frontier status in May following five years of review.

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