Abu Dhabi-listed companies Aldar Properties PJSC ("Aldar") and Sorouh Real Estate PJSC ("Sorouh") announce today that their boards of directors have unanimously voted to recommend a merger to their shareholders. The proposed merger will create a stronger and more diversified company to take advantage of future opportunities in Abu Dhabi and other regional markets in the coming years. The proposed transaction would be a statutory all-share merger, with Sorouh shareholders receiving 1.288 Aldar shares for each Sorouh share they hold. On the effective date of the merger, Sorouh shares would be delisted from the Abu Dhabi Securities Exchange and Sorouh would be dissolved as a legal entity. Aldar will be named Aldar Sorouh Properties PJSC ("Aldar Sorouh"). The merger would create one of the largest listed real estate companies in the Middle East and North Africa region, with over AED 47 billion of combined total assets as of September 30 2012, and combined market capitalization of approximately AED 10.9 billion based on closing share prices on 17 January 2013. The combined group will have a diversified portfolio of assets with total equity of AED 14.7 billion as of 30 September 2012 and an attractive pipeline of assets under development in Abu Dhabi. The boards of the two companies believe that the combined business will offer significant benefits to all stakeholders. This would bring together two complementary businesses that will have a more diversified and balanced asset portfolio, a strong balance sheet, visible high quality earnings, better access to capital markets and synergies of up to AED 110 million per annum by 2015. Customers will benefit from a broader product suite across a range of assets within the Emirate of Abu Dhabi. Abubaker Seddiq Al Khouri, currently Managing Director at Sorouh, is proposed to be the Chairman of the merged company. Ali Eid AlMheiri is proposed to be the Vice Chairman of the merged company. The merged company will be managed by a mix of the best talent from both companies, with a strong track record of delivering developments, knowledge of the local market and industry expertise. The merger is subject to a number of conditions, including the approval of the merger by at least 75 per cent by value of the shares represented at quorate extraordinary general meetings ("EGMs") of Aldar and Sorouh. Under the proposed terms of the merger, the Government of Abu Dhabi and related entities will own approximately 37% of the combined company on a fully-diluted basis. Sorouh also announces today that it is has agreed to a transaction for a total consideration of AED 3.2 billion with the Government of Abu Dhabi, that has been approved by a resolution of His Highness the Crown Prince of Abu Dhabi, Chairman of the Executive Council. The transaction comprises reimbursement by the Government for certain infrastructure assets (AED 1.6 billion) and the purchase by the Government of units in The Gate development (AED 1.6 billion). Aldar Chairman Mr. Ali Eid AlMheiri said: "I am delighted to confirm the board's recommendation to merge Aldar with Sorouh. The two companies are an excellent fit. They bring together complementary assets and capabilities, diversified portfolios and an enhanced asset base and balance sheet to create a stronger entity that is best positioned for sustainable growth." Mr. Mubarak Matar Al Humairi, Chairman of Sorouh, said: "The merger combines complementary high quality assets and strong management capabilities to take the business to the next level. The merger takes place at the right time in the property cycle as it offers our shareholders, customers, business partners, and the people and Government of Abu Dhabi a strong real estate partner that will deliver sustainable growth in this exciting market for years to come." TERMS OF THE MERGER The merger is intended to be effected by way of a merger by affiliation pursuant to Article 276(1) of the UAE Federal Law No. 8 of 1984 concerning Commercial Companies (the "Companies Law"). Subject to the satisfaction of the conditions to the merger, upon the effective date of the merger the assets and liabilities of Sorouh will be assumed by Aldar in consideration for the issue of new Aldar shares to Sorouh shareholders. Upon the merger becoming effective, shareholders of Sorouh will become shareholders in Aldar Sorouh, the Sorouh shares will be delisted from the Abu Dhabi Securities Exchange and Sorouh will be dissolved. The merger will result in new Aldar shares (which will be listed on the Abu Dhabi Securities Exchange ) being issued to Sorouh shareholders on the basis of 1.288 Aldar shares for each Sorouh share they hold. Upon completion of the merger, the total issued share capital of Aldar Sorouh will be 7,466 million shares. Following the issue of the new Aldar shares, Sorouh shareholders would own approximately 45.3% of the combined company and Aldar shareholders would own approximately 54.7%. Once the remaining convertible bonds issued by Aldar to Mubadala Development Company are converted into equity in full, the relative ownership of Sorouh and Aldar shareholders will be 43% and 57% respectively. BENEFITS OF THE MERGER Following the merger, the combined company will be the largest real estate company in Abu Dhabi and the second largest publicly listed real estate company in the UAE, with combined total assets of approximately AED 47.1 billion as of 30 September 2012. The combined company will be the owner of one of the largest land banks in the region (77 million sqm), 90% of which is located in investment zones. The combined company will be the developer of choice in Abu Dhabi, with a strong track record of delivering large-scale projects. The merger will bring enhanced ability to prioritise and select value adding projects, as well as monetise the combined company's land bank and recycle capital into growth opportunities. The Government will be a key customer for Aldar Sorouh as it continues to deliver strategic assets and various projects for the Government. The boards of directors of Aldar and Sorouh expect the merger to create shareholder value through synergies. The Aldar and Sorouh boards of directors estimate total annual cost synergies of approximately AED 90 million to AED 110 million, through rationalisation of duplicate central functions and corporate expenses, procurement savings, optimisation of financial charges due to improved credit terms and integration of IT platforms. Full run-rate synergies are expected to be achieved by 2015. To capture these synergies, one-off integration costs have been estimated at approximately AED 60 million. Please refer to the shareholder circular to be published in connection with the merger for a full discussion on the benefits of the merger for the combined company following implementation of the merger. CONDITIONS TO THE MERGER AND REQUIRED SHAREHOLDER ACTION The merger is subject to the following conditions: (a) resolutions approving the merger and certain ancillary matters having been passed by the requisite majority of the shareholders attending and entitled to vote at the EGMs of Aldar and Sorouh respectively; (b) all consents that have been identified by each of the Aldar and Sorouh boards of directors as necessary to the implementation of the merger having been obtained; and (c) the merger agreement dated 21 January 2013 between Aldar and Sorouh setting out the terms and conditions of the merger not having been terminated. Further details on the Aldar and Sorouh EGMs will be sent to Aldar and Sorouh shareholders in due course and contained in the shareholder circular. Following satisfaction of the conditions listed above, the Aldar and Sorouh boards of directors will apply for a resolution of the UAE Minister of Economy approving the merger and the associated steps required to implement the merger including, the dissolution of Sorouh, the increase in the share capital of Aldar and the amendments to Aldar's articles of association. It is currently anticipated that, subject to the satisfaction of these conditions, the merger will become effective in June 2013. This timeframe is indicative only and is subject to change. DIRECTORS AND MANAGEMENT Subject to the merger becoming effective, the board of directors of Aldar Sorouh will comprise nine members nominated by Aldar and Sorouh. Abubaker Seddiq Al Khouri, currently Managing Director at Sorouh, is proposed to be the Chairman, and Ali Eid AlMheiri is proposed to be the Vice Chairman of the combined company. The remaining board members will be announced in the shareholder circular. The senior executive team for the combined company will be appointed prior to the EGMs of Aldar and Sorouh. Press Release
