Dubai Islamic to Acquire Mortgage Lender Tamweel Via Share Swap

Dubai Islamic Bank PJSC offered to take over mortgage provider Tamweel PJSC through a share swap, four days after the United Arab Emirates’ central bank issued guidelines restricting home loans.

Tamweel shareholders will be offered 10 Dubai Islamic shares for every 18 held, the bank said in an e-mailed statement today after the market close. The fair value of Dubai Islamic and Tamweel shares was set at 2.25 dirhams and 1.25 dirhams, respectively.

Tamweel shares fell 2.5 percent to 1.19 dirhams at the close today, valuing the company at 1.2 billion dirhams ($327 million). Dubai Islamic shares rose 1.5 percent to 2.06 dirhams.

The offer follows the U.A.E. central bank’s decision to cap mortgages for foreigners and nationals at 50 percent and 70 percent of the property values. Dubai’s real estate market is showing some signs of recovery after prices plunged about 65 percent over four years after global credit crisis, bringing the emirate to the brink of default in 2009. Dubai’s ruler in November announced developments including a new district that includes the world’s biggest shopping mall.

Shares of Tamweel and Amlak Finance PJSC, another Dubai-based Islamic mortgage provider, were halted in 2008 after the government announced plans to merge the two companies and inject money to help them cope with the financial crisis. The merger plan was abandoned after Dubai Islamic increased its stake in Tamweel to 58 percent.

Tamweel shares, which resumed trading in May 2011, will be delisted from the Dubai stock market after completion of the takeover, said Dubai Islamic, the U.A.E.’s biggest lender complying with Shariah banking laws.

Before it's here, it's on the Bloomberg Terminal.