After over a year since it announced its intentions to take over Ahli United Bank (AUB), Kuwait Finance House (KFH) is ready to make an offer to acquire the Bahraini financier, in a move that would not only create one of the largest banks in the Gulf by assets, but also one of the first fully-fledged digital banks in Kuwait.
After months of negotiations, KFH has officially relayed its “firm intention” to make a voluntary conditional offer to acquire all of the issued and paid-up ordinary shares of AUB by way of a share swap, involving the Bahraini bank’s 8.77 billion ordinary shares valued at 25 US cents each and any other shares issued by AUB. As agreed by both parties, the consideration of the offer has been set at an exchange ratio of one KFH share for every 2.32 of AUB shares. KFH shareholders have agreed on issuing over 3.77 billion new shares to finance the acquisition; the final consideration number of new KFH shares will be determined and announced as part of the offer process.
This merger was long expected. As early as May 2017, the media caught wind that KFH and AUB have been exploring a potential merger; this was denied until KFH and AUB signed an MoU and a non-disclosure agreement to explore the feasibility of combining their operations to establish one of the top 10 largest lenders in the Gulf, with assets to be worth some US$100 billion.
Should the offer be accepted by AUB, AUB will be rebranded to become Kuwait Finance House–Bahrain as a wholly-owned subsidiary of the Kuwaiti Islamic bank. A conventional lender by nature, AUB’s business in Bahrain, Egypt, Iraq and the UK will be converted to be aligned with Shariah principles.
Interestingly, AUB’s subsidiary in Kuwait will be transformed into a digital bank, at the request of the Central Bank of Kuwait. This move comes as the regulator pushes forward with its digital agenda as its neighbors leap forward to capitalize on the digital revolution and jostle for fintech supremacy in the GCC.
In October, regional telecommunications company Zain entered into a partnership with Kuwaiti Shariah bank Boubyan Bank to build an Islamic digital bank to serve the Kuwaiti market. Should both these initiatives come to fruition, Kuwait could be home to two fully-fledged virtual Islamic banks, more than any of its GCC peers.
The acquisition offer is conditional upon KFH receiving at least 85% in valid acceptances of the total issued share capital of AUB; AUB shareholders agreeing to convert the bank’s business to be compliant with Islamic law; securing final regulatory approvals; and KFH successfully completing a cross-listing on Bahrain Bourse.