The planned merger between Mosul Bank for Development & Investment and Union Bank of Iraq has been approved during the general assembly meeting held on 25 May (MEED20:5:11).

It marks the first ever merger on the Iraq Stock Exchange (ISX). The new entity will have a comnined equity of ID135bn ($115.8m).

Mosul Bank agreed to increase its bonus shares by 21.9 per cent and new paid shares by 28.1 per cent to increase its capitalisation from ID50bn to ID75bn.

Union Bank will increase its distribution of bonus shares by 20 per cent from ID50bn to ID60bn.

The companies will now need the approval of the Central Bank of Iraq and Companies Registrar before it can proceed with the merger. No timeline has been put in place for the completion of the deal.

The chairman and managing director of Mosul Bank will retain their position in the new bank, which will be named Bank of Mosul.

“It will be a slow process because this is the first merger for Iraq and it is very new,” says Wassim Al-Jzrway, chief executive officer of Baghdad-based brokerage firm Al-Karmal Company.

The merger comes after a decision by the central bank to increase the capital of banks on the ISX to a minimum of ID100bn by the end of June 2011.

If the deal is completed smoothly, it will pave the way for other banks on the exchange to follow. Currently 15 of the 21 private banks listed fall short of having ID100bn in capital.