Arbitration call on TII/DBG merger

12 July 2002

Kuwait-based The International Investor (TII)announced on 10 July that it will refer its outstanding contractual issues with Saudi Arabia's Dallah Albaraka Group (DBG) relating to its stalled merger to international arbitration. TII also said that it was preparing to submit its financial results for 2001 to the Central Bank of Kuwait.

'We remain committed to our strategy of regional expansion and remain committed to the merger plan,' says the TII spokesman. 'Even if this means going ahead with a scaled down version of the share swap and possibly only merging some of the DBG assets with TII. Our board has decided to pass the matter to arbitration, as was agreed in the original contract with DBG, and we will see what emerges from that.'

An ambitious plan to merge nine of the Islamic banking assets of DBG with TII was launched last year and was partly based on a capital increase at TII that would have been accompanied by TII's offer of cash and shares for the DBG equity positions in nine of its banking subsidiaries (Banking, MEED Special Report, 22:2:02, pages 34-36).

However, the deal began to unravel in April when one of the key parties signed up to the capital increase defaulted on its subscription. The unnamed GCC institution is understood to have committed itself to the acquisition of 100 million of the 360 million shares on offer, prompting the need for TII and DBG to reassess the merger plan.

'We have sought advice from the Commerce [& Industry] Ministry [in Kuwait] over whether our capital increase can be revoked and are waiting to hear from them,' says a TII spokesman. 'This is a complex issue and understandably they are considering it carefully. Current legal advice suggests the share issue cannot be cancelled.'

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