Wednesday 15, March 2017 by Nabilah Annuar

GFH clarifies market speculation on a merger with SHUAA Capital

GFH Financial Group (GFH) asserts that no final decision has been made on any acquisitions or mergers. The firm also announced the appointment of a new Chief Placement Officer.

SHUAA Capital’s stock price recorded an 18 per cent surge earlier this week on the back of a news report from MEED stating that SHUAA chairman, Jassim Alseddiqi was discussing a potential share-swap merger with a larger undisclosed regional institution that could be worth billions of dirhams.

In response to this, GFH issued a statement on 14 March 2017 to the Dubai Financial Market confirming to its shareholders and the market that a final decision is yet to be made.

In line with GFH’s new strategy to acquire financial institutions and strategic assets that was approved by its shareholders in its EGM on 1 March 2017, GFH has in fact been in discussion with several financial institutions, including SHUAA Capital, for potential majority share acquisitions and/or mergers with those financial institutions. Nevertheless, the statement affirmed that no final decision has been reached.

Due to the confidentiality of discussions with the counterparties, GFH is unable to disclose any further information at this stage. The firm will notify shareholders and the market on any progress of these talks as well as other acquisitions once agreements have been reached with the counter parties. Following this statement, GFH’s stock price reportedly closed 4.2 per cent lower.

In a separate release on the same day, GFH announced the appointment of Luay Ahmadi as Chief Placement Officer. In this capacity, Ahmadi is responsible for the overall placement activities of GFH. Prior to this, he was the Senior Executive Officer of GFH Capital. Ahmadi has held senior positions in Emirates NBD, Energy Capital Group, Unicorn Investment Bank, Deutsche Bank, NORIBA/UBS and Citibank Bahrain.

According to industry reports, GFH and SHUAA has been interconnected since last year. Early June 2016, reports emerged that GFH and Abu Dhabi Financial Group (ADFG) intended to setup a new Islamic financial institution at the Abu Dhabi Global Market with an authorised capital of $100 million. A week later, a statement to Dubai Financial Market confirmed ADFG’s purchase of Dubai Banking Group’s 48.36 per cent stake in SHUAA Capital. Later in December, SHUAA Capital concluded the acquisition of a 14 per cent (147,106,849 shares) ownership stake in Khaleeji Commercial Bank (KHCB), a subsidiary of GFH Financial Group.

In press release on KHCB’s Annual General Meeting on 14 March 2017, an extraordinary general meeting was held for the approval to exempt GFH Financial Group from presenting an offer of compulsory ownership and acquisition to the rest of the shareholders, increasing the ownership percentage of 46.97 per cent to no more than 55.38 per cent of the shares of KHCB, through the acquisition of shares owned by Emirates Islamic Bank, over the next three years.

A recent report by Reuters estimated that a merger of SHUAA Capital and GFH Financial would form a conglomerate with a market capitalisation of about $2.5 billion, holding interests ranging from retail and investment banking to broking and property development.

In an exclusive interview with Banker Middle East in September 2016, Hisham Al Rayes, CEO of GFH Financial Group highlighted, “Besides the organic growth that GFH has been focusing on in the past few years, the Group is looking at means of inorganic growth by way of acquiring other financial institutions to enhance return to shareholders, access new markets and diversify income contribution. In addition, being listed in one of the most important market in the region (Dubai Financial Market), and with important shareholders like ADFG, we see many opportunities in the market for GFH and its shareholders.”

Features & Analyses