Islamic insurer Watania rises close to 10% on takeover interest

Watania's initial public offering at the Abu Dhabi Securities Exchange, above, in 2011 was seven times oversubscribed. Mona Al Marzooqi / The National

Abu Dhabi’s Watania surged almost 10 per cent in trading after the Islamic insurer became a takeover target for an Omani conglomerate looking to expand its takaful business.

The Securities and Commodities Authority has approved the acquisition of 60.53 per cent of Watania’s shares by two subsidiaries of Muscat-based MB Holding Company.

MB UAE Investments will take a 51 per cent stake in Watania’s paid-up capital and Al Madina Insurance as a “related group” will take 9.53 per cent. MB has up to February 24 to execute the acquisition, Watania said in a statement on the Abu Dhabi bourse website. The insurer did not disclose the price that the 90, 803,596 shares would be sold at, or who would be the sellers.

The stock is closely held with eight large investors including Ajman Bank, Abu Dhabi National Islamic Finance, a unit of NBAD, Abu Dhabi National Insurance and Taqa, accounting for more than 80 per cent of shares, according to data from the Abu Dhabi exchange on Bloomberg.

The insurer’s IPO was seven times oversubscribed in 2011.

“UAE SCA’s approval of the request for the purchase does not mean the applicant’s commitment to execute the trade, since it can retreat from implementing it or in case the purchase order does not match sell orders, and that each person must take responsibility for his decision to trade on the company’s shares,” Watania said.

Watania surged as much as 13.89 per cent during trading yesterday. It shaved some of its gains, however, by the end of the session. At the 2pm close, the stock had recorded a 9.2 per cent gain to Dh1.18.

The insurance sector has traditionally competed on price rather than products and services. Sixty-one insurance companies are competing in the UAE, 27 of them foreign. Insurance firms have typically invested in local equities as a means to offset losses from their core businesses. They were hit hard amid a sell-off of UAE equities – their principal investments – after the 2008 global financial crisis.

Shares listed on the Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market had lost 80 per cent and 55 per cent respectively from their peaks in January 2008, hitting record lows in January 2012. But they have since rallied more than 100 per cent on the ADX and more than 260 per cent on the DFM.

Watania swung to a profit in the second quarter, registering a net income of Dh2.08 million in the period, compared with a loss of Dh6.96m a year earlier.

“MB is an Omani company but with a global operation. They are in multiple businesses, oil and gas, mining and finance,” said Kunaga Sundar, the head of research at Gulf Baader Capital Markets in Muscat. “It looks like the UAE market is showing some promising trend and that they [MB Holding] have found some growth stories.”

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