Qatar orders property merger
DUBAI, Jan 19 (Reuters) - Qatar's government ordered two domestic real estate companies to merge on Monday, the latest in a series of mergers and acquisitions in the Gulf Arab region where firms are struggling to cope with the global turmoil.
Barwa Real Estate BRES.QA, an affiliate of state-owned Qatari Diar, and Qatar Real Estate Investment Co QREC.QA, in which the government owns a minority stake, said they were still in the early stages of examing terms and conditions of the merger.
Consolidation in the oil-exporting region has been on the rise since late last year as the financial crisis and an oil price slump ended an economic boom, forcing firms involved in everything from property to investment to search for ways to weather the downturn.
The Qatari real estate merger would be the fourth in the world's biggest exporter of liquefied natural gas in three months, and follows a planned merger between two private investment companies in Kuwait on Sunday.
"The purpose will be to create a much bigger entity which can take the pressure due to the financial crisis," said Samer al-Jaouni, general manager of Middle East Financial Brokerage Co in Dubai. "Qatar is trying to take action before things get worse."
Al-Jaouni said that real estate prices in some areas under development in Qatar had fallen by 30 percent to 40 percent from their peak.
Earlier on Monday, the Qatari government had called on Qatar Meat & Livestock Co QMLS.QA (Mawashi) and Al Meera Consumer Goods Co to merge, while Qatar Navigation QNNC.QA and Qatar Shipping Co QSHP.QA were ordered to combine in November.
"The move comes in line with the country's policy in investment to maximise higher return on investment," Barwa and Qatar Real Estate said on Monday of their merger.
The merger was also aimed at "enriching the national economy and supporting the economic development", the two firms, with combined market capitalisation of $2.5 billion, added in a statement, without elaborating.
COPING WITH DOWNTURN
Barwa, which is building a 35 billion riyal ($9.61 billion) residential development in Qatar and operates two hotels in Switzerland, aimed to finish all projects it has started, Chief Financial Officer Tamer Khedr said.
But like real estate companies across the Gulf, Barwa would not undertake any new projects, Khedr told Reuters.
He said the merger made sense because Qatar Real Estate has "a very stable, predictable cash flow", adding it was too early to say whether Barwa would need to raise new capital to complete the transaction.
Gulf economies are expected to slow down considerably this year, but Qatar's economy would still expand about 9.5 percent in real terms in 2009, the fastest in the Gulf Arab region, a Reuters poll showed in December.
Consolidation has been one way Gulf firms are coping with new economic realities.
Kuwait's First Investment Co (OLAK.KW) and Gulf Investment House (GIHK.KW) reached an initial merger agreement on Sunday.
The United Arab Emirates federal government, meanwhile, is combining mortgage firms Amlak AMLK.DU and Tamweel (TAML.DU) with one of its banks to create a firm that can weather the downturn as a building boom unravels in Dubai.
Earlier this month, meanwhile, Gulf Warehousing GWCS.QA said it was merging with Agility Qatar, a unit of Kuwait's Agility (AGLT.KW), the Gulf's biggest logistics firm.
(Additional reporting by Thomas Atkins; Editing by Rupert Winchester)
Is creating monopolies and oligopolies really going to help the economy in the long run? I think that's no good. Markets can't find the true values then.
What do you think?
Besides, here is an example of how i have seen some big companies operating. E.g. One company holding 100 flats. Rent being demanded is 9500/month. They won't negotiate with a customer who is willing to pay 9000/- using reasoning that they have a policy of keeping the same rent for all flats. As a result, the flat stays vacant for 2 months. Revenue lost ? 9000*2 = 18000/-
Even if after 2 months they do manage to find a tenant @9500 it will be 36 months before the additional 500 will help them recover the lost 18000/- !!!!
Just bad business sense or what?
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Quidquid latine dictum sit, altum sonatur.
That commercial bank dropped 7.2% on the DSM and that profit were 2/3rds LOWER for Q4 2008.
Qatar is heading for the rocks, it's going to be fascinating having a ringside seat.
The Causeway is not going to be built. Delay till Sept means NEVER GONNA HAPPEN
this merger was in the pipeline some 6 months back. It was reported in the newspapers at the time. Wonder how everyone missed it..............
Causeway has been postponed. Didnt you read in the newspapers? THey are planning to integrate rail network along with it so there has been a postponement to December or something like that.........
The governments is trying to take steps to rationalize the Real Estate sector.. This is neccessary in the long run..
Not to say I told you so but.......been predicting it for months, it was bloody obvious and worst of all the Government has only known good times recently and planned for them to continue, they won't be able to react quick enough to sort the mess out. It's a house of cards here watch out for more to come and the papers trying to spin it.
Look for increased mentions of GDP increasing, projects being announced (with no start dates the Causeway is a great example Never gonna happen).
If you are working in real estate good luck !
If you own real estate, well.....................
there was a complete shit-storm on the markets yesterday
Saudi Basic Industries (SABIC) issued a profit warning, which everyone took to mean that the region is already in recession. The DSM plunged, and one trader quoted anonymously told the newspapers he thought Qatari companies had been selling assets to keep the balance sheets looking healthy.
Strange how 6 months ago this region was bullet proof and would never be affected.......
just eat another pie
these are stock holding companies. Don't shareholders get asked?