KFH receives nod from AUB on share swap ratio in takeover offer

The two lenders are in talks to create an entity with $92 billion of assets.

KFH suspended the acquisition of Bahrain’s Ahli United until December. Andrew Henderson / The National

Kuwait Finance House, the country’s biggest Islamic lender, received “tentative” approval from Ahli United Bank on the share swap ratio to complete a potential takeover of the Bahraini lender.

KFH’s board of directors, who met on Thursday, also tentatively approved the exchange ratio of 2.326 shares of AUB for each share of KFH, according to a statement on Thursday to Boursa Kuwait, where KFH's shares are traded. HSBC and Credit Suisse are acting as advisors and conducted studies on the exchange ratio.

“KFH has received the tentative approval of AUB on the results of the said studies and the preliminary average exchange ratio between KFH and AUB shares,” KFH said. “Final decisions are subject to the approvals of the general assemblies of both banks, the Central Bank of Kuwait and the Central Bank of Bahrain and other relevant regulatory bodies.”

The exchange ratio is subject to due diligence, which will start once regulatory approval from the central banks of Bahrain and Kuwait is received.

In July last year KFH revived talks with AUB that had stalled over a difference in valuation between the two financial institutions, according to Bloomberg.

Gulf banks are eyeing acquisitions and mergers as they seek to cut costs and create big entities capable of competing regionally and boosting profitability. Other lenders are offloading non-core assets to achieve operational efficiencies.

AUB and its Kuwaiti subsidiary are in initial talks to sell their joint shareholding in Kuwait and Middle East Financial Investment Company to Warba Bank, the Bahraini lender said earlier this month.

AUB did not disclose the size of its joint shareholding in the investment company, the value of the stake or when the deal is expected to be concluded.

The two lenders said that the talks may not result in a transaction and any potential deal will be subject to regulatory approvals.