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Anatomy of a take-over.

On 23 February 2009 Al Salam Bank had revealed it was in merger talks with Bahraini Saudi Bank (BSB). Al Salam released a statement to the Bahrain and Dubai bourses, saying it was in the early stages of exploring the possibility of combining its operations by issuing shares to BSB shareholders. The statement went on to say, "Consolidation in the Bahrain banking sector is inevitable and as a larger financial institution the combined entity will be more competitive in the market place." <p>A month later Al Salam said, "[the two groups] have engaged in serious discussions to merge," adding that, "The process of due diligence and evaluation is on schedule and is expected to be completed in the coming weeks," and that the boards of each bank will meet separately to decide the share-exchange ratio. Al Salam Chief Executive Officer and Yousif Abdullah Taqi and BSB Chief Executive Officer Khalid Shaheen confirmed that both institutions had retained professional services firm KPMG in Bahrain as independent adviser on the transaction. <p>Al Salam tables the offer On 21 April 2009 Al Salam Bank officially submitted a conditional offer to acquire Bahraini Saudi Bank The all-paper share swap offer promised BSB shareholders one Al Salam Bank share for every two ordinary BSB shares. The offer was conditional upon two-thirds of BSB's shareholders accepting the offer.<p>Al Salam's shareholders approved the merger proposal at an Extraordinary General Meeting (EGM) held on 4 May 2009 at the Ritz-Carlton Hotel in Bahrain. Speaking to reporters on the sidelines of the EGM, Mohammed Ali Alabbar, Chairman of Al Salam Bank, said, "We are living in the age of competition and mergers and acquisitions as part of consolidation would create robust financial institutions." In 2007 Al Salam Bank had carried out a stock split from BHD 1/share to 100 fils, increasing the number of shares to 1.2 billion. The EGM authorised an increase to two billion.<p>Yousif Abdullah Taqi noted that the approval meant that, "We are one step away from taking over the Bahrain Saudi Bank. We offer the best possible price to BSB shareholders and it is up to them to accept itC* Al Salam is to acquire all the issued shares and the fully paid up ordinary shares of BSB consisting of 500 million shares worth 100 fils each."<p>A done deal On 1 June 2009 Al Salam revealed that acceptances received exceeded the conditional threshold of at least 333,333,334 BSB Shares representing 66.67 per cent of the bank's issued share capital. Al Salam had received acceptances for 350,745,822 shares in BSB, (70.15 per cent) and declared the offer unconditional.<p>Al Salam extended the offer for a further 27 days and by 30 June 2009 that it had received acceptances amounting to 400,941,159 shares,(80.2 per cent). The offer was further extended to 12 July 2009 with the approval from the Central <p>Bank of Bahrain. On 7 July, Al Salam reported acceptances equivalent to 90.4 per cent.<p>In the meantime, on 22 June 2009, a BSB EGM saw 93 per cent of attending shareholders agree to accept the bid in a procedural step ahead of acquisition. Some 68 per cent of BSB shareholders were represented at the meeting.<p>The merged bank will become a Shari'ah-compliant institution with eight retail branches and 16 automated teller machines after the acquisition. Based on the two banks' financial statements at the end of March, the acquisition would lead to an entity with combined assets of BHD 797.03 million ($2.11 billion). Al Salam Bank reported a 6.5 per cent rise in its 2009 first-quarter net profit to nearly BHD 7.91 million ($21 million), while BSB's net profit for the same period plummeted 76 per cent to BHD 374,000. <p>A tale of two banks Al Salam Bank is an Islamic commercial bank licensed by the Bahrain Monetary Authority and registered by the Ministry of Industry and Commerce of the Government of Bahrain. The bank listed on the stock markets in Bahrain and Dubai through an initial public offering (IPO) priced at BHD 1.50/share in February 2006. The IPO followed on from the establishment of the bank with a capital of BHD 120 million. The Al Salam Bank IPO, which was 63 times oversubscribed, was the largest in Bahrain's history. The bank offered 35 per cent of its paid up capital in the form of 42 million Ordinary Shares to individual and institutional investors. <p>The bank's main backers at launch, holding 65 per cent of the equity equivalent to BHD 78 million, were Emaar Properties, Amlak Finance, Dubai Investment Group, Dubai Holding, Global Investment House, Lebanese Canadian Bank, Al Salam Bank in Sudan and Aman Insurance and Re-insurance Company in addition to a large number of companies and businessmen from Bahrain, the United Arab Emirates and the Kingdom of Saudi Arabia.<p>Bahraini Saudi Bank is an older but significantly smaller institution than Al Salam Bank. It was established in 1983 with a paid up capital base of BHD 20 million, originally equally held between Bahraini and Saudi shareholders. The bank raised its paid up capital to BHD 50 million, following the successful completion of a rights share offering in March 2005. Bahraini Saudi Bank offers conventional commercial and retail banking services to customers in the Kingdom of Bahrain. BSB is 54.42 per cent publicly owned, while Bahrain's Pension Fund Commission owns 10.06 per cent. The remainder is privately held by by Bahraini and Saudi companies and businessmen.<p>2009 CPI Financial. All rights reserved.

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Publication:Islamic Business & Finance
Geographic Code:7SAUD
Date:Aug 6, 2009
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