Dubai's Shuaa Capital considers potential merger

12 March 2017

Deal to merge with a larger regional financial institution could be worth billions of dirhams

Shuaa Capital is in talks with a larger regional financial institution for a potential merger in a deal, which could be worth billions of dirhams, a top executive at Dubai-listed investment bank has said.

“There is a bigger discussion happening to merge Shuaa with a much bigger regional entity,“ Shuaa chairman Jassim Alseddiqi told MEED without naming the institution the firm is in talks with. “The anticipated ticket size [of the deal] will be in billions of dirhams.”

Alseddiqi, who is also the chief executive of Abu Dhabi Financial Group (ADFG), a UAE-based alternative investment firm which bought a 48.36 per cent stake in the investment bank in November, did not elaborate on at which stage the deal is and how soon it is expected to be concluded.

The merger, if successful, would be done as a shares transaction, he said, adding that Shuaa will retain its brand identity.

“Shuaa is not changing into something else”, Alseddiqi said. “I would love, at the right value of course, to do a deal for Shuaa through shares.”

The aim of the merger is to achieve scale and synergies to make it more competitive in investment banking space and drive the company’s bottom-line.

”The benefit is synergies, purely synergies. If it doesn’t make sense from synergies perspective and bottom-line perspective, we will not do it, because it is pretty much bottom-line driven at the end of the day,” he added.

In February, Shuaa reported a 30.4 per cent reduction in overall group losses for the financial year 2016 to AED132.5m ($36.1m) from AED190.3m. The loss for the fourth quarter of last year significantly narrowed down to AED18.9m from AED161.8m recorded for a year-earlier period.

“We enter 2017 on a positive note. The company faced difficulties throughout the year. However, as the new board of directors take helm, we expect a turnaround year in 2017,” Alseddiqi said in a statement at the time.

Shuaa, he told MEED, will be a revived legacy from the past and “we are giving it three years to achieve that”.

Acquisitions

The investment bank is actively looking at acquisitions and it already in talks for a potential acquisition of a UAE-based financial services company, Alseddiqi said, adding that the ticket size of the deal could be around AED150m.

“For Shuaa to grow, there are two ways – organically or through acquisitions and we are pursuing both routes,” he said adding that a “small bolt-on” has happened already. “This is a smaller one. It’s a 10 per cent stake in a public company in the GCC,” he said without naming the entity.

Shuaa, on 12 March, announced that it is entering an agreement to acquire Integrated Capital and Integrated Securities from Integrated Financial Group, pending due diligence and regulatory approval.

Integrated Capital is a central bank licensed investment company. It acted as the co-lead on the debut $500m bond issuance by Etihad Airways Partners last year. Integrated Securities, formerly known as First Gulf Financial Services when it was part of Abu Dhabi lender First Gulf Bank (FGB) is a securities brokerage business with over 3,000 retail and institutional clients.

Shuaa bought a 14 per cent stake in Khaleeji Commercial Bank (KHCB), a Bahrain-based Islamic retail lender for $25m, according to a 25 December Shuaa statement.

KHCB is a subsidiary of GFH Financial Group, which in May 2016 said that it planned to list the lender on Dubai Financial Market (DFM). “It is with no doubt that the shareholders’ value will see substantial growth if KHCB obtains final approvals to list on the Dubai Financial Market,” Alseddiqi said in the statement at the time.

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