Kuwait Finance House’s (KFH) purchase of Bahrain’s Ahli United Bank is expected to boost consolidated profit by more than 90 percent from the level in 2018, KFH said on Saturday.
The two banks announced the deal on Thursday, the first major cross-border bank merger in the Gulf region in recent years.
It will create the largest banking entity in Kuwait with assets of about $94 billion, and the sixth largest bank in the Gulf region.
The banks, which have been in merger talks since mid-2018, agreed on a preliminary exchange ratio of one KFH share for every 2.326 AUB shares. They have not revealed the share prices for the exchange ratio.
According to Refinitiv data and Reuters calculations, based on KFH’s current share price of 0.623 dinars, the deal values AUB at $7 billion, above its current market capitalization of $6 billion and representing a 17 percent premium on AUB’s share price.
In the statement on Saturday, KFH Chairman Hamad Abdulmohsen al-Marzouq said shares would be issued equivalent to about 53.96 percent of KFH’s current shares.
KFH’s lending capacity would increase by 61 percent after the acquisition, allowing it to tap new markets such as Egypt and the United Kingdom, the bank said.
Bank mergers have picked up pace in the region after two of the United Arab Emirates’ biggest banks linked up to create First Abu Dhabi Bank last year.
The Bahraini and Kuwaiti lenders said the deal was subject to completion of due diligence and regulatory approvals.
The valuation report was prepared by HSBC and Credit Suisse, they said.
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