Dubai Mergers offer Possible Escape from Collapse
The global financial crisis has taken a serious toll on Dubai, and the latest news from the emirate suggests things are far worse than the government is prepared to admit to. Transparency in Dubai’s property market has long been an issue, and just last week, the press releases coming from the emirate suggesting the problem is over/never existed/didn’t happen/has reached bottom were still as strident as ever, but the latest news suggests the problem is even bigger than previously thought.
Emaar's Burj Dubai project
Emaar properties has announced that it intends to merge with three entities owned by Dubai Holdings: Dubai Properties, Sama Dubai, and Tatweer. Dubai Holdings also owns the Jumeirah group and is largely a govenrnment owned company. Emaar is already 31% government owned. Although this merger will require stockholder approval, it certainly looks likely to proceed, and is probably the only course of action that will allow Emaar to survive the current crisis.
All four of the companies involved in the merger have canceled billions of dollars worth of projects recently and there are substantial outstanding debts still unpaid to sub contractors and angry investors. The luxury real estate market in Dubai is certainly facing some serious challenges, and the lack of transparency plus poorly thought out new laws have been adding to that burden for some time. None of the details of this merger were clear during the announcement and Emaar shareholders reacted negatively as this is tantamount to a government bailout – there is a strong liklihood that existing shareholders will, if not lose all their investment, almost certainly see it substantially diluted. Emaar’s shares fell another 10% on the announcement, dragging the Dubai stock market down with it.
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Comments on Dubai Mergers offer Possible Escape from Collapse
I also think mergers will really help to overcome some impact of global financial crisis but it is not the solution. The corrupted and unregulated system should be governed.
Every new and big projects should be scrutinized and looked after from its start to end.
Global crisis not only effect the financial sector but also hit every industrial sector. The reason is “disturbance in financial cycle”. Industrials especially the people who involve in construction and property business, run their cycle on credit but when the prices of the property goes down, it effects the property dealers’ payment schedule that ultimately the one cause of crisis in financial sector that direct or indirectly effect the overall economy support. and I support the merger option in this situation.
As of now the merger decisions, are either kept on hold, or is a sure no go. Cause most of the companies that were set to merge have gained back there foothold in the market. Hence by a merger would result in lot of commotion.