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21 January 2020
INVESTMENT

KFH shareholders approve the acquisition of Bahrain's AUB

The Central Bank of Kuwait and the Central Bank of Bahrain have agreed to start the acquisition process

The deal is expected to give the bank access to regional markets with a population of over 430 million/Shutterstock

by Kudakwashe Muzoriwa

Kuwait Finance House’s (KFH) shareholders have approved the acquisition of Bahrain's Ahli United Bank (AUB), a step closer to the completion of the region’s first cross-border merger in recent years at a time when several other banks are consolidating.

Hamad Abdulmohsen Al-Marzouq, the Chairman of KFH, said that the merged entity would have assets of $101 billion and shareholder equity of $10.5 billion, with an annual forecast profit of $1.5 billion, based on past performance.

The shareholders agreed on the acquisition of 100 per cent of the capital shares of AUB by way of share swap at an exchange ratio of one KFH share for every 2.326 AUB shares.

“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,” said Al-Marzouq.

The acquisition of AUB will turn KFH into a direct investment and banking destination, reducing group costs across its markets, enhancing the efficiency of resources allocation and increasing profitability, said Al-Marzouq.

In a bourse filing, KFH stated that its shareholders also approved the listing of the bank on Bahrain Bourse and authorised the Board of Directors to set the date of the listing.

Lower oil prices over the past five years are forcing Gulf lenders to consolidate for scale and to better compete in a crowded market. Subdued credit growth, competition for deposits, higher cost of funds and deteriorating asset quality are driving consolidation in the regional banking sector.

The merger between Alizz Islamic Bank and Oman Arab Bank (OAB) is the latest deal nearing completion. Alizz Islamic Bank and Oman International Development and Investment Company’s Board of Directors approved a share swap ratio of around 81 per cent: 19 per cent for the shareholders of OAB and Alizz Islamic Bank respectively.

Additionally, the National Bank of Bahrain, which owns 29 per cent of Bahrain Islamic Bank (BisB), acquired a 78.8 per cent stake in the Islamic bank, a month after the national bank offered to buy up to 100 per cent of the Shari’ah compliant lender’s paid-up ordinary shares.

In the UAE, Dubai Islamic Bank also received shareholders’ approval for the acquisition of Noor Bank through a capital increase and share swap to create a banking entity with assets of more than AED 275 billion.

The deal is expected to give the bank access to regional markets with a population of over 430 million people and  a median annual per capita income of approximately $42,000 on the basis of purchasing power parity. 


RELATED STORIES: Oman Arab Bank Alizz Islamic Bank Bahrain Bourse mergers and acquisitions Ahli United Bank M&A Kuwait Finance House Bahrain Islamic Bank National Bank of Bahrain


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