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'These comprehensive discussions are driven by a shared vision regarding the consolidation of our respective visible success stories to date, and the creation of a world class group...We look forward to working with Dubai Holdings with a view to completing these discussions soon and ensuring value accretion to our existing shareholders.'
Royal Bank of Scotland and Merrill Lynch International are to advise on the prospective deal, the valuations of the companies, and the assessment of possible transaction structures.
Emaar anticipates that the consolidation will take place over a four-month period. The valuation exercises are anticipated to be finished by August, legal due diligence by September and the gaining of approval from regulators and Emaar's shareholders by October.
Dubai government entity Investment Corp of Dubai currently holds approximately 31.5% of Emaar's shares, with the rest being owned by the public. And public shareholder reaction to the proposed deal is still an unknown, although Emaar has said that it will ensure that minority shareholders benefit from any arrangement. In 2007 Emaar and Dubai Holding had to abandon a land-for-shares agreement after shareholders objected.
It is also unclear what state the finances of the Dubai Holding companies are in - as privately held groups, they do not had to make their balance sheet public.
Combined assets
The new group would have combined assets valued at Dhs194bn, although it is not clear whether this is the value of completed assets, compared to Dhs13.4bn in debt obligations, Emaar said in a statement on the Dubai Financial Market.
Dubai-based finance house Al Mal Capital responded to news of the merger by suspending its rating for Emaar, 'until more information becomes available'.
Al Mal noted that if the new combined entity received 'substantial financial stimulus from the Dubai government, in a form that is not dilutive to existing shareholders', Emaar's stock could rise.
The finance house also expects more market rumours of potential mergers to come out, with Union Properties and Deyaar among the prime candidates for speculation-driven trading.
In February, Dubai Holding merged the back room operations of Dubai Properties, Sama Dubai and Mizin, as part of cost cutting measures.
The announcement follows a statement, released on Thursday, that Nakheel would now manage the property functions of fellow Dubai World companies LeisureCorp, Dubai Maritime City and Dubai Multi Commodities Centre.
Edward Poultney, Editor - English
