Dubai's Shuaa Capital eyes controlling stake in Kuwait's Global Investment House

General manager says the investment bank has cut headcount by 35% in 12 months

Shuaa, which was the top investment bank in the Arabian Gulf region before the 2008 financial crisis, has expressed intentions to gain scale through acquisitions. Jaime Puebla / The National

Dubai's Shuaa Capital aims to conclude a deal to acquire a stake in Kuwait-headquartered Global Investment House (Global) "in the coming year", its general manager said. 

Shuaa, which in October said it was interested in a deal with a Kuwaiti financial services firm, is currently in talks with the shareholders of Global for a controlling stake, Fawad Khan said in an interviewTuesday , without specifying the exact size of the shareholding Shuaa seeks in the company. 

The transaction is still subject to a commercial agreement between the parties and regulatory approvals.

Shuaa, which was the top investment bank in the Arabian Gulf region before the 2008 financial crisis, has expressed intentions to gain scale through acquisitions and expand its footprint within the region. Its talks, however, for a possible merger with the Bahrain-based shariah-compliant GFH Financial Group, “were off the table,” Mr Khan said. 

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“We are not talking to them at the moment. There is no immediate plan to recommence these discussions,” he said. “Instead we are looking at other opportunities for growth. We have disclosed our interest in Kuwait-based Global Investment House and believe this to be a better fit with our own business [than GFH].”

Talks with Global, Mr Khan added, were in the preliminary stages and are based on perceived synergies between the two firms – in particular, Global’s significant and growing real estate asset management business, which is a core focus for Shuaa.

Global is a regional asset management and investment banking firm with offices across Middle East and North African region.

Last month, the company said its nine-month 2017 net profit more than doubled year-on-year, to 3.5 million Kuwaiti dinars (US$11.5 million). Total revenues stood at 12.1m dinars for the same period.

On Monday, Shuaa said a strong performance in its own real estate asset management and credit businesses helped the company report a nine-month profit of Dh60m, its highest since 2007. The company, which fell on hard times after the financial crisis, had to go through financial restructuring in 2014.  

Shuaa's net profit for the three months ending September 30 climbed to Dh23m, from a net loss of Dh35.3m, in the corresponding period last year, the company said in a statement to Dubai Financial Market, where its shares are traded.

Cost cuts, Mr Khan said, have helped Shuaa's return to profitability. The company and its subsidiaries, reduced the total headcount to 130 people in the third quarter of 2017 from 200 at the end of September 2016. This is reflected in a 40 per cent reduction in the general and administrative expenses in the third-quarter earnings, he added.

Expenses in the third quarter also fell 85 per cent to Dh13.5m from Dh87.3m a year earlier, including a drop in provisions set aside for non-performing loans.

“The significant drop in provisions was an achievement on its own, and is attributed to the newly adopted lending business strategy by the new board and management at Gulf Finance Corporation focused on secured lending and aggressive recoveries,”
Mr Khan said.

Restructuring of Shuaa’s business is complete and no further cost-cutting is planned. “Now is the time for Shuaa to look ahead and grow,” he said, adding that the company is actively seeking new acquisition opportunities for its capital markets and asset management businesses.

Based on strong performance from the firm's real estate business in Saudi Arabia, the biggest Arab Economy, it will remain a key area of focus for Shuaa in the coming year.

It is holding discussions with regulator the Capital Markets Authority to list a real estate investment trust on the Saudi bourse in the first half of 2018, he said.

Shuaa, has already identified seed assets for the fund including residential, education and hospitality properties, he
noted.