The new company will also include Emirates Aluminium Co (Emal) -- a joint venture between Dubal and Mubadala -- and will have a production capacity of 2.5 million tonnes annually, Dubal Chairman Sheikh Hamdan Bin Rashid Al Maktoum was quoted as saying.

Sheikh Hamdan, who is also Dubai's deputy ruler and UAE finance minister, spoke at a news conference event to discuss Dubal's annual results.

"Until now no percentage (shares) was specified but I think it's a good share. They are not negotiations, but offers," he said, adding it was unclear what percentage of shares Mubadala will agree to buy.

Dubai, hit by a crippling debt crisis, has undergone a bout of debt restructuring and must sell assets to repay creditors of state-linked conglomerate Dubai World and dig out from under a massive debt pile.

Dubal is currently valued at $7 billion, according to its Vice Chairman Ahmed Humaid Al Tayer, the paper said.

A Mubadala spokesman declined comment on the offer on Thursday but said the two sides were looking at ways to expand their partnership.

"These ongoing discussions have always been aimed at improving the scale and standing of our national aluminum industry on the global stage," Mubadala said in an emailed statement.

The glitzy Gulf Arab emirate is estimated to have about $115 billion in debt, accumulated during a six-year boom that led to ambitious projects such as islands in the shape of palm trees.

Dubai could sell non-core investments under the emirate's sovereign wealth fund, the Investment Corporation of Dubai (ICD), such as stakes in Union National Bank, Dubai Aluminium, and Borse Dubai, investment bank J.P. Morgan said in a research note in February.