Close to 60 per cent of the shareholders voted in favour of the move. However, the motion required an outright majority of 75 per cent. 'As far as we are concerned, the merger is off,' says Sanjeev Dureja, chief financial officer of Majan. 'The shareholders rejected Bank Dhofar's offer and it is now up to them to come back to us with better terms.'

Bank Dhofar had tabled a deal worth RO 29.4 million ($75 million) that involved a mixture of shares, bonds and cash. Under the terms of the offer, 50 per cent of the bank's stock would be acquired by Bank Dhofar on the basis of one ordinary share equalling 2.35 Majan shares. A further 25 per cent stake would be converted into bonds, with a coupon value of 6 per cent and a five-year tenor. The balance of RO 14.7 million ($37 million) was to be paid up in cash.

'Bank Dhofar is still interested but we will not die without Majan,' says VK Raina, assistant general manager in Bank Dhofar's corporate banking group. 'It will not make a huge difference to our bottom line and we don't anticipate increasing our offer.' Bank Dhofar, which was established in 1990, is the larger of the two institutions. The bank operates a network of 43 branches, compared to 16 run by Majan. It already owns a 6.2 per cent stake in the bank.

The collapse of the proposed merger has opened the door for other investors to increase their holding in Majan. The local Suhail Bahwan Group, which already owns a 6.6 per cent stake, is understood to be close to finalising a deal to buy a further 10-15 per cent of Majan's shares from Germany's Commerzbank. The move could make Bahwan its largest shareholder.

'Bahwan is at an advanced stage of negotiating the purchase of more stock. However, it first has to clear Central Bank of Oman regulations governing the acquisition of more than 10 per cent in a local bank,' says Dureja.