Dar Al Takaful and Watania agree on potential merger

The deal is expected to be completed in the third quarter of this year

ABU DHABI - UNITED ARAB EMIRATES - 14JAN2013 - Share holders watch the display of share market at (ADX) Abu Dhabi Securities Exchange. Ravindranath K / The National
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Islamic insurance companies Dar Al Takaful and National Takaful Company (Watania) reached an agreement for a potential merger as they look to consolidate market share in the UAE.

The proposed transaction is expected to be completed in the third quarter of this year, subject to shareholders and regulatory approvals, the companies said in a joint statement on Thursday to both the Dubai Financial Market and the Abu Dhabi Securities Exchange, where they trade.

The deal has received conditional approval from the Central Bank of the UAE. Both the companies are "actively working with the Securities and Commodities Authority and other relevant regulators to obtain the remaining regulatory approvals", the statement said.

The merger will help the companies "consolidate market share in the highly fragmented UAE takaful market and build scale for the combined company; extend the geographical and products diversification of the existing businesses; and generate meaningful cost synergies driven by economies of scale and overlapping functions to enhance profitability".

Abu Dhabi-listed Watania acquired a 4.9 per cent stake in Dar Al Takaful in May 2020 for Dh5.88 million ($1.6m). The move was aimed at generating investment income by way of capital appreciation and dividends in the future, the company said at the time.

The same year, Dubai-listed Dar Al Takaful bought competitor Noor Takaful for Dh215m in cash, acquiring its Noor Takaful General and Noor Takaful Family units.

The UAE insurance market is expected to grow at a compound annual rate of 4.1 per cent between 2021 and 2026, Alpen Capital said in a report last month. "Expansion of compulsory business lines, growing standards of regulation and supervision as well as favourable immigration policies are likely to support its growth."

The report also said the insurance market across the GCC witnessed higher consolidation in 2021 through increased mergers and acquisitions as companies were "compelled to renew their focus on building resiliency and rethinking their risk management strategies".

“M&A [merger and acquisition] activities across the GCC insurance sector remained buoyant during 2020 amid downturn in activities due to the Covid-19 pandemic. As economies reopened, 2021 witnessed some revival in businesses leading to M&A activities stirring up again in the region," said Krishna Dhanak, managing director at Alpen Capital.

"Going forward, focus is likely to be directed towards value-creating opportunities with larger players targeting small to mid-sized players as well as tech-enabled operators and aggregators. This will not only strengthen the competitive capabilities of the players in the market but also encourage the creation of newer products and services in the sector amid weakening profitability."

Dar Al Takaful and Watania said the merger would lead to "increased scale, diversification and meaningful synergies", which would potentially benefit policyholders and shareholders in the long term.

Emirates NBD Capital will act as the joint adviser on the merger and KPMG will be the joint financial, VAT and IT diligence adviser, with Milliman as the joint actuarial diligence adviser. Ibrahim and Partners will be the legal adviser to Dar Al Takaful, while Hadef and Partners will act as legal adviser to Watania.

KPMG will also act as the independent valuer for both companies.

Updated: March 03, 2022, 12:11 PM
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