KFH offers to buy Ahli United in share swap deal

KUWAIT • Kuwait Finance House (KFH) offered to buy Bahrain’s Ahli United Bank BSC in a share swap deal, a potential combination that would create the Gulf’s sixth-biggest lender with US$92 billion (RM379.96 billion) in assets.

HSBC Holdings plc and Credit Suisse Group AG, the advisors on the merger process, recommended a swap ratio of 1 KFH share for every 2.325581 Ahli United shares, the banks said. The ratio is subject to satisfactory due diligence and regulatory approvals. The current swap ratio would value the deal at about US$7 billion based on the lenders’ closing price last Thursday, according to Bloomberg calculations.

KFH shares declined 0.8% in Kuwait to 623 fils (RM84.71) before the announcement, while Ahli United shares in Bahrain advanced 2.7% to 75.5 US cents.

The proposed exchange ratio is a starting point and the final price could differ depending on the due diligence, a person familiar with the matter said. An agreement on the deal may still take another six to nine months, the person said.

The Kuwaiti lender considered offering one share for every 2.1 in Ahli United, people familiar with the matter had said earlier last Thursday. While that offer was initially discussed, it changed amid negotiations between the parties and may fluctuate further going forward, the people said.

KFH and Ahli United in July said they’d started renewed discussions for a potential merger. Initial talks between the banks faltered over price, people familiar with the matter said last January.

Lower oil prices over the past four years are forcing Gulf lenders to consolidate for scale and to better compete in a crowded market. Subdued credit growth, a squeeze on deposits, higher cost of funds and deteriorating asset qualities are driving consolidation in the regional banking sector.

In Saudi Arabia, the National Commercial Bank is in talks to merge with Riyad Bank to create the Gulf’s third-largest lender with US$182 billion in assets. Abu Dhabi is working on a merger of three of its banks, potentially the emirate’s second in just over a year. About a dozen other regional lenders are also involved in takeover talks. — Bloomberg