Sorouh Rallies as Aldar Plunges on Merger Terms: Abu Dhabi Mover

Sorouh Real Estate Co. headed for the highest close in more than two years as the terms of a merger to create the Middle East’s third-largest publicly traded developer favored its shareholders over Aldar Properties PJSC.

The shares jumped 5.5 percent to 1.72 dirhams, set for the highest close since December 2010, at 12:16 p.m. in Abu Dhabi. Aldar shares dropped 9.2 percent, poised for the largest decrease in almost two years, to 1.48 dirhams. Abu Dhabi’s benchmark ADX General Index rose less than 0.1 percent.

Aldar will offer 1.288 shares for every Sorouh share in a government-backed acquisition that will create a group with assets of about $13 billion, according to a joint statement today. The two companies first announced the plans to merge last March, driving the shares to trade at 1.22 dirhams on March 11. Until today, the stocks had surged in tandem by 34 percent since then.

“We did expect that the share swap will work better for the Sorouh shareholders,” Tariq Qaqish, a Dubai-based fund manager at Al Mal Capital PSC, said by e-mail today. “Investors are punishing Aldar, although this will adjust with time.”

The merger comes as Abu Dhabi’s government tries to revive a real estate market where values have fallen by more than 50 percent since the onset of the global credit crisis in 2008. The government of the United Arab Emirates capital, which encouraged the transaction, paid $9.8 billion to bail out Aldar in 2011. It has also resumed stalled projects, bought struggling developments and commissioned new ones.

The merged entity, to be called Aldar Sorouh Properties PJSC, was unanimously recommended by both boards and is subject to shareholder approval, according to the statement today. Once complete, Aldar will own 54.7 percent and Sorouh 45.3 percent of the combined entity, it said.