Two Qatari real estate firms which have suffered large drops in share prices in the last year are being ordered to merge by the government to protect both from failure. For more information, read the following article from Property Wire.
More firms in the Middle East will need to merge to withstand the global financial crisis, it is claimed as two real estate companies in Qatar tie up.
The government ordered a merger between Barwa Real Estate and Qatar Real Estate Investments, the fourth such move in three months.
The two firms, which have a combined market capitalisation of $2.5 billion, are still working out the terms of the merger.
"The move comes in line with the country’s policy in investment to maximise higher return on investment in the Qatari shareholding companies while enriching the national economy and supporting the economic development in the State of Qatar," they said in a joint statement.
Tamer Khedr, chief financial officer and acting president of financial services of Barwa Real Estate, an affiliate of state-owned property developer Qatari Diar, said it was too early to say whether Barwa would need to raise new capital to complete the transaction.
Shares in both companies have suffered like many real estate companies because of the global economic downturn. Barwa lost 33 percent last year and 25 percent so far this year. Qatar Real Estate fell 42 percent in 2008 and another 16 percent this year.
Khedr said Barwa aimed to finish projects it has started but now has no new plans to launch further projects
It is probably not the end of such mergers, according to analysts. "This is the fourth time it has happened in the Qatari market and on governmental orders," said Samer al-Jaouni, general manager of Middle East Financial Brokerage Company in Dubai.
"The purpose will be to create a much bigger entity which can take the pressure due to the financial crisis. Qatar is trying to take action before things get worse," he added.
His firm reckons that real estate prices in some areas under development in Qatar had fallen by 30 to 40 percent from their peak.
This article has been reposted from Property Wire. View the article on Property Wire’s international real estate news website here.