Shuaa Capital and Abu Dhabi Financial Group (ADFG) on Wednesday announced that they have approved to merge the two businesses in a landmark transaction for the regional financial services industry.
This is a key step to cement the combination of ADFG and Shuaa to date and rapidly boost their growth, according to a press release.
Both firms said it “represents a transformational combination to establish the leading Asset Management and Investment Banking platform in the region.”
Under the Transaction, Shuaa will issue around 1.470,720 billion new shares to ADFG’s parent company Abu Dhabi Capital Management, which is the Strategic Investor, in return for the whole issued share capital of ADFG.
Accordingly, the strategic investor will hold 58% of the enlarged entity, the two companies revealed.
“The combined entity will remain listed on Dubai Financial Market (DFM) and is expected to be rebranded as “ADFG” with work on a full integration plan underway,” the release noted.
Moreover, the new Shuaa shares will be subject to a 12-month lock-up from the date of admission, they noted.
Shuaa has agreed on a valuation based on the issuance price of AED1 per share that represents a 60% premium to the undisturbed Shuaa share price of AED 0.622 apiece calculated as of 21 March 2019
Shuaa’s issued share capital will rise to 2.535 billion shares from 1.065 shares following the admission of the new shares.
Fawad Tariq Khan, CEO of Shuaa, commented: “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,” he added.
The transaction is due completion in the third quarter of 2019 and is subject to Shuaa shareholder approval, customary regulatory approvals, and satisfaction of conditions precedent.
The transaction, which has been approved by Shuaa’s board of directors, is expected to boost the company’s earnings with increased profitability and diversification.
Furthermore, Shuaa’s pro forma revenue would jump by 176% in 2018 and pro forma earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins would increase to 38% from 34%.
Jassim Alseddiqi, CEO of ADFG, said: “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.”
Shuaa shareholders will be voting on the transaction at the general meeting to be held on 11 July.
It is worth noting that J.P. Morgan, Herbert Smith Freehills, and PwC act as the financial advisor, legal advisor, and financial due diligence advisor to ADFG, respectively.
Meanwhile, UBS Investment Bank, Linklaters, and Deloitte act as the financial advisor, legal advisor, and financial due diligence advisor to Shuaa, respectively.
However, KPMG is acting as an independent valuer for both ADFG and Shuaa.