Bahrain's GFH confirms talks on possible Shuaa merger

Bahrain’s GFH Financial Group may merge with Dubai-based Shuaa Capital, GFH said on Tuesday, confirming market speculation that sent both companies’ share prices surging this week.

“GFH has been in discussion with several financial institutions, including Shuaa Capital, for potential majority shares acquisitions of those financial institutions and/or mergers,” GFH said in a statement to the Bahrain bourse, without disclosing further details.

A spokesman for Shuaa declined to comment.

A merger of the two firms would form a group with a market capitalisation of about $2.5 billion and interests ranging from retail and investment banking to broking and property development.

Both companies were prominent in the region a decade ago, before they were forced to shrink by the global financial crisis. Both have said they want to use acquisitions to resume growing rapidly.

Earlier this week, local news provider MEED quoted Shuaa chairman Jassim Alseddiqi as saying his firm was discussing a potential share-swap merger that could be worth billions of dirhams with a larger, regional institution. He did not name the institution.

Shuaa’s stock price jumped over 18 percent to a seven-year high on Sunday and Monday. But it closed 4.2 percent lower on Tuesday after GFH released its statement, suggesting some investors were now wondering whether the financial terms of a merger would benefit Shuaa shareholders.

GFH’s Dubai-listed shares jumped 7 percent on Monday but closed 0.7 percent lower on Tuesday.

A web of ties between GFH and Shuaa began forming last year. In May, Abu Dhabi Financial Group (ADFG) and GFH said they were jointly setting up an Islamic bank called ADCorp in Abu Dhabi’s new financial free zone with initial capital of $100 million.

In November, ADFG bought a 48.36 percent stake in Shuaa, which has a market capitalisation of about $535 million. In December, Shuaa bought 14 percent of Bahrain’s Khaleeji Commercial Bank for $25 million. GFH owns 47 percent of Khaleeji.

On Sunday, Shuaa said it would acquire Integrated Capital and Abu-Dhabi based brokerage Integrated Securities, both controlled by ADFG. Integrated Capital owns 11.74 percent of GFH, according to Thomson Reuters data. ADFG officials did not respond to requests for comment about the possible merger.