Dubai: West Asia’s largest real estate developer,Emaar Properties PJSC, pushed Dubai’s index to its biggest decline in at least seven months on concern shares of the company may be suspended or diluted pending a potential merger.
Emaar fell 10%, the maximum daily limit allowed, after the company said it’s in talks to merge with state-controlledDubai Properties Llc., Sama Dubai Llc. and Tatweer Llc., all units of Dubai Holding Llc.
The new entity will have 13.4 billion dirhams ($3.65 billion) in debt obligations, representing 7% of the entity’s total assets of 194 billion dirhams, Emaar said on Sunday in a statement to the local bourse. Emaar’s own debt obligation was 10 billion dirhams, or 15% of the total book value of 68 billion dirhams in assets, at the end of March.
“Investors are worried a merger may mean a long share halt as is the case with Amlak and Tamweel,” said Mohamed Dwaikat, a broker at Al Fajer Securities in Abu Dhabi. “There is also concern about a possible dilution of the shares.”
Amlak Finance PJSC and Tamweel PJSC, the United Arab Emirates biggest mortgage firms, haven’t traded since November pending a planned merger.
Emaar, the builder of Burj Dubai, the world’s highest tower, said on Saturday the merger will generate exceptional cost savings amid a glut of homes that pushed local property prices down. The consolidation will be completed in October.
Dubai’s real estate market was hurt by the global financial crisis and home prices have tumbled by about 50% from their peak, and may drop another 20% this year, Deutsche Bank AG said on 10 June. The market’s collapse followed a construction boom that created thousands of homes just as demand began to evaporate.
Emaar fell to 2.89 dirhams. Al Mal Capital PSC suspended its recommendation on the company, saying the planned merger could be potentially dilutive for Emaar shareholders.