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AlDar

Aldar increases synergy estimates and completes merger integration

: Tuesday, March 04 - 2014 @ 14:23

Aldar Properties PJSC, Abu Dhabi’s leading listed property development, investment and management Company, confirmed that it has successfully completed all aspects of its integration significantly ahead of schedule, following the merger with Sorouh in June 2013.

The merger brought together two complementary businesses to create greater value for all shareholders and stakeholders. Key to this was the development of a more diversified and sustainable business model with a balance between revenues derived from development projects and stable recurring revenues from its investment properties and asset management activities.

Today, Aldar has a very strong management team that has the experience to take advantage of future growth opportunities. All systems and business processes are completely aligned and all re-branding activity is now complete.

The Company’s initial per annum synergy estimate of Dhs90-110 million by 2015, was derived principally from operational efficiencies and interest savings on acquired debt. The Company is pleased to announce that this estimate has been increased by 45% to Dhs145-150 million per annum based on stronger than expected operational synergies and revised lower cost of debt acquired in the acquisition, a significant proportion of which will start to be realised in 2014.

H.E. Abubaker Seddiq Al Khoori, Chairman of Aldar Properties said: “the 45% increase in synergy estimates and the ability to complete the merger integration well ahead of schedule reinforces the complementary nature of the two businesses. I am confident that we now have the right team and business processes in place to maximise stakeholder value by creating and managing quality developments.”

Aldar’s Chief Strategy Officer, Paul Warren, added: “This was an extremely complex integration of two very large businesses, and the ability to extract so much value from the integration is a testament to the hard work and commitment of the teams who have been working together. Key to the success of the integration has been the development of a detailed strategy to drive the growth of the merged business with the aim of becoming the most trusted and recognised developer in Abu Dhabi.”

Aldar’s Chief Financial Officer, Greg Fewer, commented: “We are pleased that the capital markets have reacted so positively to the merger and Aldar’s cost of capital is lower as a result. We have reduced our overall interest expense significantly and together with the improved operational efficiencies we have created real value for our shareholders.”

Complex Integration Process

The integration was a complex process due to the scale of both businesses and involved significant cooperation and commitment from all employees. There were seventeen integration work-streams across all areas of the operation. Each work-stream comprised a joint team from both companies and the overall integration programme was overseen by the specially formed internal ‘Integration Management Office’.

The most complex and important part of the integration process included alignment of a new corporate strategy, business plan and budgets. Core to this was the reprioritisation of a new development project pipeline. In addition, operations were restructured to give better control and accountability, where notably a new ‘Asset Management Division’ was created to optimise the management of the company’s vast recurring revenue asset base. To ensure the Company was staffed with the right employees, a new organisational structure was developed and a comprehensive selection process implemented to bring the best of both companies to the new roles in a fair manner.

The debts of the two companies were integrated and the strength of the combined Company was recognised by the rating agencies with a four notch upgrade to Ba1/positive and a two notch upgrade to BB/Stable from Moody’s and S&P, respectively. Aldar has seen a significant reduction in the cost of debt of both the acquired company debt and more broadly across the entire capital structure. Since the merger, the Company has repaid Dhs6 billion of debt and raised new debt of Dhs2.7 billion and Dhs4 billion of undrawn committed liquidity facilities and will continue to optimise its capital structure by implementing refinancings designed to lower interest expense.

The final and the most intensive part of the integration was merging two different IT platforms and in particular the enterprise resource planning (‘ERP’) systems. ERP management software enables a company to use a system of integrated applications to manage the business and automate back office functions, creating significant efficiencies and reducing cost.

Positioned for Growth

Today, Aldar has the right management, business processes, systems and capital structure in place to take the business to the next stage of its development. This, together with the new strategy in place, makes the Company well-positioned to capture the growth opportunities in the Abu Dhabi real estate market and, in turn, deliver long-term value to shareholders.

For media or investor enquiries:
For Aldar: +971 2 810 5555

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Tuesday, March 4- 2014 @ 14:23 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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