Leading UAE-based investment bank Shuaa Capital is set to merge with Abu Dhabi Financial Group, its largest shareholder, to create a powerhouse with $12.8 billion in assets under management (AUM).

In a joint statement on Wednesday, the two entities announced that they had agreed on the terms of merger, under which Shuaa would issue 1.47 billion in new shares to ADFG’s parent company Abu Dhabi Capital Management in return for the entire issued share capital of the Abu Dhabi firm.

This means that ADFG’s shareholders will own 58 per cent of the enlarged entity while Shuaa’s existing shareholders will own 42 per cent. The combined entity will remain listed on Dubai Financial Market and is expected to be rebranded as ADFG.

The new Shuaa shares will be subject to a 12-month lock-up from the date of admission. The agreed valuation represents a 60 per cent premium to the Shuaa share price on March 21, the last trading day before the announcement of the merger talks, according a statement made by Shuaa to the DFM.

Shares in Shuaa jumped five per cent to Dh0.095, becoming the top gainer on Dubai’s index.

Jassim Alseddiqi, CEO of ADFG, described the transaction as a milestone in regional financial services industry. “We believe that there is a compelling investment proposition to establish a regional financial services powerhouse by bringing together two market leaders in their respective areas, ADFG and Shuaa. This combination will enable us to leverage ADFG’s pioneering products and services across a far broader distribution platform, bringing significant synergies to the enlarged entity,” he said.

Fawad Tariq Khan, CEO of Shuaa, said there is a strategic rationale in bringing together the two businesses, whereby the sum of the two is greater than its constituents.

“Having made excellent progress in turning our business around over the past three years, supported by ADFG as a major shareholder, we now see the potential to accelerate Shuaa’s growth. The combined business will benefit from considerable synergies, an expansive distribution network and a deep pool of talent. All of this will help drive the business performance and create real and long-term sustainable value for shareholders of both companies,” Khan 

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