Kuwait Finance House Shareholders Give Green Card to AUB’s Acquisition
Post a recently held general assembly meeting, Kuwait Finance House has affirmed plans to purchase Bahrain’s Ahli United Bank. Reports claim the merger can possibly become the Gulf’s sixth-biggest lender with $101 billion in assets.
As per the Chairman of Kuwait Finance House, Hamad Abdulmohsen Al-Marzouq, the Central Bank of Kuwait and the Central Bank of Bahrain have agreed for the initiation of the acquisition. He announced, “This acquisition represents a powerful engine for growth and prosperity in the future of KFH, providing access to many new markets in Britain, UAE, Oman, Iraq and Egypt and strengthening the position of KFH in its current markets.”
According to Al-Marzouq, the deal will give the bank an opportunity to access regional markets with a population of more than 430 million people. He added, ”The deal also would turn KFH into a direct investment and banking destination, reducing group costs across its markets, enhancing the efficiency of resources allocation and increasing profitability.”
Reaching the value of about $101 billion, the acquisition will generate the largest Islamic banking entity in the world in terms of assets. Al Marzouq said, “The new entity will be converted into a fully digital bank.”
Based on its past performance, the annual forecast profit of the merger is $1.5 billion. The shareholder equity of the new entity will be $10.5 billion.
Sources claim that the acquisition of 100 percent of capital shares of AUB will be done by the method of share swap at an exchange ratio of one Kuwait Finance House share for every 2.326 AUB shares. As per Al-Marzouq, the move will turn Kuwait Finance House into a direct investment and banking destination, thereby reducing group costs across markets, improving the efficiency of resources allocation and hiking profitability.
At a Stock Exchange filing held recently, Kuwait Finance House’s shareholders approved the listing of the bank on Bahrain Bourse and authorised the Board of Directors to set the listing date.
Fluctuating oil prices in the past five years have forced Gulf lenders to consolidate for scale and better competition in a crowded market. Driving factors in the regional banking sector include competition for deposits, higher cost of funds, subdued credit growth and diminishing asset quality.
The latest deal near completion is the combined entity between Oman Arab Bank (OAB) and Alizz Islamic Bank. The share swap ratio of almost 81:19 percent was agreed between Alizz Islamic Bank, Oman International Development, Investment Company’s Board of Directors and for the shareholders of OAB and Alizz Islamic Bank respectively.
With an ownership of 29 percent of Bahrain Islamic Bank, the National Bank of Bahrain purchased a 78.8 percent stake in the Islamic bank. The acquisition comes a week post the national bank offered to purchase nearly 100 percent of the Shari’ah complaint lender’s paid-up ordinary shares.
Besides Kuwait Finance House, Dubai Islamic Bank in the UAE has also received shareholders’ approval for purchasing Noor Bank via capital increase and share swap. The merger will potentially be valued at AED 275 billion. Reports claim that the deal will give the bank access to regional markets with a population of 430 million+ people and a median annual per capita income of roughly $42,000 based on purchasing power parity.
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