Sorouh Elects New Chairman

The Abu Dhabi property developer, which is eyeing a possible merger with Aldar, replaced its chairman last week.

Abu Dhabi’s Sorouh Real Estate has appointed Mubarak Matar al Humairi as its new chairman replacing Saeed Eid al Ghafli, according to a report by Reuters. The developer elected the new chairman during a board meeting on Thursday, Sorouh said in a statement to the bourse.

The move came amidst merger talks that Sorouh is holding with Abu Dhabi’s Aldar Properties. The firms are conducting a review to study the move, which they intend to complete in the next three months, the two developers recently announced in a joint statement.

The transaction has already courted some controversy; unusual trading patterns in the stocks of the two companies when they announced the merger, led to a newspaper report saying that the case was being investigated by the ADX. However, the CEO of the Abu Dhabi Securities Exchange was quick to deny all reports of a trade inquiry, saying that they found no violations.

Other officials have also said that the dealings are transparent.

Meanwhile, financial experts say that the merger, if successfully concluded, will have a positive impact on Aldar. Moody’s Investors Service said that it identified more positives than negatives.

“Factors that would have a positive impact on Aldar’s credit profile include: the potential for synergies and cost savings; the impact on the pro forma consolidated profile of Sorouh’s lower balance sheet leverage and improved debt service profile; and the potential to better manage and control future property developments given the combined group’s strengthened market position,” Martin Kohlhase, vice president and senior analyst at Moody’s Corporate Finance Group, Dubai, said in a statement.

However, a merger with Sorouh would weigh down Aldar’s credit profile, Kohlhase added. “That’s because of Sorouh’s higher proportion of properties under development (on an absolute and relative basis) that are subject to execution risk, and its larger commercial, non-government exposure that is subject to market risk,” he said.

Last year, Aldar reported sales of Dhs6.7 billion and a net profit of Dhs643 million, while Sorouh reported revenues of Dhs3.8 billion and a net profit of Dhs383 million. Sorouh’s total assets equal around 35 per cent of Aldar’s assets, according to Moody’s.