Credit - Bloomberg
Kuwait Finance House (KFH) is considering offering a premium of about 35 per cent to buy Bahrain’s Ahli United Bank BSC.
Thursday 24, January 2019
(Bloomberg)--The potential share swap deal could create the Gulf’s sixth-biggest lender with $92 billion of assets.T
The Kuwaiti lender may offer one share for every 2.1 in Ahli United Bank, according to people familiar with the matter, who asked not to be identified because the matter is private. That would value the deal at about $8 billion, according Bloomberg calculations.
The premium is based on the companies’ closing share prices on Wednesday. Ahli United Bank has advanced about 11 per cent since the banks started talks in July, while Kuwait Finance House has gained around 0.5 per cent. The Bahraini bank may not accept the offer and the final terms of the deal could change, the people said.
Lower oil prices over the past four years are forcing Gulf lenders to consolidate for scale and to better compete in a crowded market. Subdued credit growth, a squeeze on deposits, higher cost of funds and deteriorating asset qualities are driving consolidation in the regional banking sector. Three of Abu Dhabi’s state-linked banks are in talks to combine, while Saudi Arabia’s National Commercial Bank and Riyad Bank are exploring a merger.
Kuwait Finance House shares fell 1.1 per cent as of 12:25 p.m. in Kuwait City, extending their drop this week to 2.5 per cent. Ahli United Bank shares climbed 1.3 per cent, adding to a weekly increase of 5.5 per cent. In Bahrain, where the bank is also listed, Ahli United Bank’s stock was up 2 per cent.
The boards of Kuwait Finance House and Ahli United Bank are due to meet on Thursday to discuss valuation reports from HSBC Holdings Plc and Credit Suisse Group AG, who are advising on the deal.
When asked for comment, Kuwait Finance House said it has already made a disclosure and referred to its statement on Jan 22. Ahli United Bank didn’t immediately respond to requests for comment.
Kuwait Finance House and Ahli United Bank in July said they’d started renewed discussions for a potential merger. Initial talks between the banks faltered over price, people familiar with the matter said last January.