Global Law Experts Logo

Find a Global Law Expert

Specialism
Country
Practice Area
awardsr

Awards

Since 2010, the Global Law Experts annual awards have been celebrating excellence, innovation and performance across the legal communities from around the world.

Corporate Mergers and Acquisitions in the Arab Gulf States

posted 5 years ago

M&A Concept

Merger is a term used to describe the transaction which involves the combination of two or more companies and assets and the consolidation of their interests to form a single new and independent legal entity leading the previous entities to cease to exist. As a result, all rights and obligations of the lapsing companies are transferred to the new entity. This can be accomplished through the approval of the board of directors and majority of shareholders of both companies to the merger.

Acquisition is a term used to describe the transaction that involves financial and administrative control of one company over the business activity of another company and sometimes are called takeovers. This can be performed by purchasing all or a portion of the shares that are entitled to the right to vote in the General Assembly of the acquired company, whether the shares were purchased amicably or with hostility. In the latter case, the acquirer company acquires a majority stake in the acquiree company, but does not change its tradename or legal structure.

Merger Structures

Horizontal Merger: A horizontal merger takes place when two companies offering similar, or compatible, products or services to the same market combine under single ownership.

Vertical Merger: A merger between two companies producing different goods or services for one specific finished product. A vertical merger occurs when two or more firms, operating at different levels within an industry’s supply chain, merge operations. For example, an ice cream cone supplier merges with an ice cream producer.

Homogeneous Merger: A homogeneous merger is one between two companies serving the same consumer base but in different ways. For example, a TV manufacturer merges with a cable company to create a large, dominant player with only a few or no other competitors.

Market Extension Merger: A market extension merger takes place between two companies that deal in the same products but compete in separate markets.

Product Extension Merger: A product extension merger takes place between two business organizations that deal in products that are related to each other and operate in the same market

Conglomerate Merger: A merger between firms that are involved in totally unrelated business activities.

What are the Differences Between Mergers and Acquisitions?

  1. Returns: If the return paid to the company shareholders is monetary and not stocks, the transaction is referred to as acquisition not merger. However, if the return is stocks, the process is a merger not an acquisition.
  2. Company Fate: If a company does not cease to exist after another company buys its equities, the transaction is an acquisition, not a merger. Yet, if a company sells its shares and dissolves in the acquiring company and ceases to exist or both companies, the acquirer and acquiree, expire leading the way for a new company to emerge, the transaction is a merger and not an acquisition.

Mergers and Acquisitions in the GCC Countries

M&A Growth Rate

According to Kuwait Financial Centre ‘Markaz’ report merger and acquisition transactions in the GCC countries during Q1 2020 decreased by 51% relative to Q4 2019. None of the GCC countries recorded a growth in the number of closed transactions relative to the previous quarter. It is worth noting that the GCC economy experienced a significant slowdown due to the global COVID-19 outbreak and the uncertainty the pandemic has caused. As such, this has significantly impacted the level of M&A activity throughout the quarter.

Acquirers and Target Companies

Overall, the Kuwait Financial Centre ‘Markaz’ report noted that a majority of GCC firms preferred acquiring local or GCC companies as opposed to acquiring foreign targets. The UAE, Kuwait and Saudi Arabia were the most active players in terms of local activity.

Sectorial Transactions

The transactions that closed throughout the first quarter spanned across multiple sectors. With that being said, the sectors that witnessed the greatest level of activity throughout Q1 2020 were the Financials, Information Technology, and Industrial sectors.

UAE’s logistics sector led the top GCC M&A transactions during Q1 2020. The second largest transaction was taken on by Qatar Petroleum, that acquired a 25% stake in Qatar Fertiliser Company. 

Baker Mackenzie Report

Kuwait ranked fifth and penultimate in the Gulf in terms of the volume of M&A transactions closed during the first three months of this year, with only 3 trades, according to the Baker Mackenzie report.

The scarcity of mega-deals coincides with the closure of large sectors of the economies around the world to combat the Corona pandemic.

The UAE led the Gulf countries with 11 mergers and acquisitions, followed by Saudi Arabia with 9 trades, Qatar third with 5 deals, Bahrain equally with Qatar, and Oman finished second.

In terms of the value of mergers and acquisitions transactions in the Gulf, Saudi Arabia ranked first with $2.56 billion worth of deals, Bahrain came second with $420 million, the UAE ranked third with $352 million in transactions, and Qatar came fourth with $303 million.

The impact of the Corona Virus pandemic on the largest merger deal in the banking sector in Kuwait (Acquisition of Kuwait Finance House and Ali United Bank)

The Kuwaiti market was busy with the merger of KFH and Ahli United Bank (Bahrain), to form the largest banking entity in Kuwait and the sixth bank in the Gulf region, with assets exceeding $94 billion.

This deal will lead to the transformation of the largest Islamic banks locally and globally. According to studies in place, the deal will yield a 26% increase in earnings per share and thus a significant increase in the bank’s dividends for the next three years.

The formation of a unified Islamic banking entity operating in 9 markets comes in line with Kuwait’s investment strategic plan, as well as Kuwait’s New Vision 2035, which targets to invest $900 billion during the relevant period. The merger of the two banks will result in a strong banking institution with a large and robust share capital that will enable credit operations geographical and qualitative expansion. The capabilities gained from the merger will enhance the acquisition of new expertise, reduce the risks of doing business, and create quality local business opportunities that can be exported to other markets.

Ahli United and KFH Merger Regulatory Conditions

KFH, listed on the Kuwait Capital Market, has received approval from the Central Bank of Bahrain (CBB) for the acquisition of Ahli United Bank. However, CBB’s approval remains conditional on the fulfilment of certain determinants set by the Central Bank of Bahrain.

Among the most prominent conditions set by the Central Bank of Bahrain to complete KFHs acquisition of Ahli United Bank:

  1. Retain all Bahraini employees at AUB-KFH Bahrain, and increase Bahraini employment in executive positions within the merged banking entity in Bahrain.
  2. Ahli United Bank external units should continue to be managed from Bahrain following the merger.
  3. At least one third of the merged bank board members must be fully independent.
  4. Allow each shareholder in Ahli United Bank the option to sell to KFH or hold his shares.
  5. Continue to list Ahli United Bank on Bahrain Stock Exchange following merger with KFH in Bahrain.
  6. Listing KFH on Bahrain Stock Exchange secondary market and allow the merged bank to invest in Kingdom of Bahrain sovereign securities, compliant with Sharia law.
  7. KFH to bear the loan allocations as instructed by the Central Bank of Bahrain.

Government decision to postpone the merger and re-evaluate deal after Corona Virus pandemic

Following the outbreak of the Corona virus pandemic and the disruption of the business, KFH announced that it had received instructions from Kuwait Central Bank Board of Directors to re-evaluate the KFH’s acquisition of Ahli United Bank of Bahrain, after the situation stabilized and the implications of the Corona epidemic were ascertained. The target is to consider the feasibility of the acquisition and conduct a reassessment of the interbank stock trading ratio once the repercussions of the Corona crisis fall into place with respect to their assets. In the meantime, Kuwait Finance House Board of Directors decided to suspend the transaction procedures temporarily until next December, without deciding to re-evaluate the deal.

On a quick note, the Central Bank does not have step-in rights to make a decision on behalf of the General Assembly unless there is a risk to the economy in general. The Central Bank of Kuwait is not entitled to make decisions on behalf of the banks as to whether the merger is legal or not, simply because commercial consequences and losses are involved.

The reason for postponing the merger decision is not merger related, but rather to a disagreement over the merger value with Ahli United Bank. It is expected that the variations of bonds prices and the rise of US bonds will impact the deal once closed. Therefore, Ahli United Bank would incur greater finance costs, which will cause its profits to drop and bank’s value to mimic such trend. Having said that, the merging value would eventually change.

 

Author

Find the right Legal Expert for your business

The premier guide to leading legal professionals throughout the world

Specialism
Country
Practice Area
LAWYERS RECOGNIZED
0
EVALUATIONS OF LAWYERS BY THEIR PEERS
0 m+
PRACTICE AREAS
0
COUNTRIES AROUND THE WORLD
0

Join

who are already getting the benefits
0
Sign up for the latest legal briefings and news within Global Law Experts’ community, as well as a whole host of features, editorial and conference updates direct to your email inbox. Naturally you can unsubscribe at any time.

Online Casino Reviews

  • Freeroll Poker Tournaments For Real Money
  • Australian Online Casino Real Money
  • Best Slot App To Win Real Money
  • Online Casino Real Money Australia
  • Best Paying Online Pokies
  • Wizard Of Oz Online Slots
  • All Slots Casino Mobile
  • Best Online Poker App Real Money
  • Best Online Casino To Play Roulette
  • Is Online Casino Legal
  • Online Casino That Accepts Paypal
  • Play Roulette For Real Money
  • Slot Apps To Win Real Money
  • Real Money Slots Online Usa
  • Safe Online Casino
  • Wizard Of Oz Slots
  • Real Online Pokies Nz
  • Biggest Online Casino In The World
  • Online Casino Pay With Paypal
  • Online Casino That Accept Paypal
  • Online Casino Canada Real Money
  • 3 Card Poker Online Real Money
  • Online Slots Real Money Canada
  • Best Online Poker Sites For Real Money
  • Real Money Poker App Android Usa
  • How To Make Money From Online Casino Bonuses
  • Real Money Poker App Iphone
  • How To Play Blackjack Online For Real Money
  • Best Slots To Play
  • Top 10 Online Pokies
  • Best Poker Apps Real Money
  • Online Casino Legal
  • Best Payout Online Casino Uk
  • Win Money Online Slots
  • Online Poker Nj Real Money
  • How To Win Online Slots
  • Casino Gaming License
  • Play Real Pokies Online
  • Blackjack Sites For Real Money
  • Real Money Casino Games For Android
  • Best New Online Slots
  • Flaming 777 Slots Games
  • Online Blackjack With Live Dealers
  • How To Play Online Slots
  • Facebook Casino Games Real Money
  • Online Casino With No Minimum Deposit
  • How To Beat Online Slots
  • Online Casino License
  • The Big Payback Slots
  • Royal Vegas Online Casino Withdrawal
  • Online Casino Minimum Deposit 5
  • Online Pokies Real Money Australia
  • Las Vegas Usa Online Casino
  • Real Money Poker App Android
  • Wheel Of Fortune Slots
  • Game Of Thrones Slots
  • Online Poker Real Money Usa Legal
  • Best Online Casino European Roulette
  • Blackjack Online Real Money Paypal
  • Online Video Poker Real Money Usa
  • How To Create An Online Casino
  • Lucky Nugget Online Casino Mobile
  • How To Withdraw Money From Online Casino
  • Platinum Play Online Casino Download
  • Online Casino For Usa Players
  • Best Online Casino Usa Real Money
  • Online Roulette Real Money Usa
  • Best Real Money Poker Sites
  • Android Slots Real Money
  • How To Start An Online Casino Business
  • How To Start An Online Casino
  • How To Start An Online Gambling Site
  • Best Online Casino For Blackjack
  • Play Baccarat Online For Money
  • Online Pokies New Zealand
  • Best Slots To Play At Golden Nugget
  • Slots Of Vegas Online Casino
  • Best Online Pokies Site
  • How To Beat Online Roulette
  • New Zealand Online Pokies
  • Online Poker Mobile Real Money
  • Which Online Slots Payout The Most
  • Is Online Casino Legal In India
  • Online Casino Software For Sale
  • Best Online Casino For Craps
  • Hard Rock Casino Slots
  • Win Real Money Online Pokies
  • Online Casino With Highest Payout Percentage
  • Poker Apps With Real Money
  • Online Roulette Real Money Review
  • Full Tilt Poker Real Money
  • Online Casino 5 Dollar Minimum Deposit
  • Online Roulette With Real Money
  • Best Online Roulette For Real Money
  • I Migliori Casino Online Italiani
  • Best Payout Online Slots
  • How To Play Baccarat Online
  • Play Casino Card Game Online
  • Play Blackjack Online For Real Money
  • Best Paying Online Slots
  • Casino License Cost
  • Online Poker Real Money California
  • Safe Online Casino Australia
  • Online Roulette Australia Real Money
  • Online Poker Real Money Texas
  • Online Roulette Real Money Paypal
  • Online Slots Australia Real Money
  • Golden Nugget Online Casino Review
  • Casino Games To Win Real Money
  • Online Pokies Australia Real Money
  • Online Gambling Blackjack Real Money
  • Win Real Money Playing Slots
  • How To Win Roulette Online
  • Aristocrat Pokies Online Real Money
  • Hollywood Casino Online Slots
  • Play Online Keno For Real Money
  • What's The Best Online Casino
  • Triple Double Diamond Slots
  • Play Roulette Online With Real Money
  • Roulette Online For Real Money
  • Play Roulette Online Real Money
  • Best Online Pokies Real Money
  • Big Red Pokies Online
  • How To Win At Online Blackjack
  • What Is The Best Online Roulette Site
  • Real Money Online Pokies
  • Spin To Win Slots
  • Ruby Slots Online Casino
  • Wheel Of Fortune Online Casino
  • Spin Palace Flash Casino Online
  • Online Poker Real Money App
  • Online Casino With Paypal Deposit
  • How To Win At Online Roulette
  • Can You Win Real Money On Slot Apps
  • Is Ignition Casino Safe
  • Online Casino Blackjack Real Money
  • Online Casino Win Real Money Usa
  • How To Make Money Online Casino
  • Online Casino Real Money Reviews
  • Slot Games To Win Real Money
  • Jackpot City Online Casino Download
  • Online Pokies Real Money
  • Casino War Online Real Money
  • Online Casino No Minimum Deposit
  • Play Wheel Of Fortune Slots Online
  • Best Online Casino Game To Win Money
  • Online Casino Without Wagering Requirements
  • Online Slots For Real Money Usa
  • Legal Online Casino Australia
  • How Do Online Slots Work
  • Best Online Casino For Us Players
  • Online Play Casino Roulette Game
  • Online Blackjack Real Money Australia
  • Real Casino Games Real Money Online
  • Online Slot Machines Real Money Paypal
  • The Best Online Casino For Roulette
  • What Online Casino Pays Out The Most
  • Start Your Own Online Casino
  • Legal Online Casino
  • Online Live Roulette Casino Game
  • Playing Blackjack Online For Real Money
  • Online Penny Slots Real Money
  • Best Online Blackjack For Money
  • How To Win Online Roulette
  • Real Money Poker Sites Usa
  • Best Time To Play Slots
  • Online Keno For Real Money
  • Best Payout Online Slots Uk
  • Online Slots Real Money Reviews
  • Best Online Pokies Nz
  • What States Allow Online Gambling
  • Best Real Money Poker App
  • Online Slots To Win Real Money
  • Real Money Slots App Iphone
  • Jackpot City Flash Casino Online
  • Ignition Casino Legit
  • All Star Slots Casino
  • How To Play Online Casino
  • Real Time Gaming Slots
  • Online Video Poker Real Money
  • How To Play Roulette Online For Money
  • How To Win On Online Slots
  • Age Of Gods Slots
  • Online Real Casino Money Games
  • Best Online Slots To Play
  • Online Poker California Real Money
  • Is Jackpot City Casino Legit
  • How To Win At Online Slots
  • Play Poker For Real Money
  • Safe Online Pokies Australia
  • Best Way To Play Slots
  • How To Play Casino Online
  • Play Online Roulette For Money
  • Online Casino Australia Real Money
  • Which States Allow Online Gambling
  • Play Keno Online Real Money
  • How To Win Online Blackjack
  • Online Blackjack With Real Dealers
  • How To Open Online Casino
  • What Are The Best Online Slots To Play
  • Big Win Casino Slots
  • Spin Palace Online Casino Australia
  • Best Slots To Win On
  • Casino Slots Win Real Money
  • Slots Magic Online Casino
  • Blackjack Online For Real Money
  • Slot Machine App Win Real Money
  • Online Casino Not Paying Out
  • Slots That Pay Out Real Money
  • Online Pokies Australia Reviews
  • Online Casino Minimum Deposit 1
  • Jackpot City Online Casino Review
  • Live Dealer Baccarat Online Casino
  • Online Casino Apps For Android
  • Online Casino Paypal Deposit Australia
  • Online Casino With Live Dealer
  • How To Play Blackjack Online
  • Slots To Win Real Money
  • Wheel Of Fortune Online Slots
  • Play Quick Hit Slots Online
  • Can You Count Cards In Online Blackjack
  • Palace Of Chance Online Casino
  • How To Play Roulette Online
  • Good Slots To Play
  • Which Online Casino Pays Out The Most
  • Heart Of Vegas Casino Slots
  • Best Online Casino For Canadians
  • Australian Online Pokies Real Money
  • Mohegan Sun Online Casino Nj
  • Online Casino Live Games Best Uk
  • Best Online Casino Australia Reviews
  • Play Pokies Online Real Money
  • Best Online Casino For Usa Players
  • How To Win Online Casino
  • Play Blackjack For Real Money
  • Best Slots On Bovada
  • Online Keno Real Money Usa
  • Online Slots Real Money Paypal
  • Best Poker Sites For Real Money
  • Safe Casino Sites
  • The Best Online Slots
  • Play Keno For Real Money
  • Real Online Pokies Australia
  • Queen Of The Nile Slots
  • Mummys Gold Casino Online Casino
  • Play Keno Online For Real Money
  • Best Poker Websites Real Money
  • Lucky Nugget Online Casino Download
  • Best Online Casino For Roulette
  • Play Roulette For Money Online
  • Video Slots Mobile Casino
  • Best Time To Play Online Slots
  • Best Real Money Online Poker
  • Play Blackjack Online With Friends
  • Play Baccarat Online For Real Money
  • Is Silver Oak Casino Legit
  • Big Fish Casino Real Money
  • Can You Win Real Money On Caesars Slots
  • Game Of Thrones Slots Casino
  • Best Online Slots Payout Percentage
  • Play Online Pokies For Real Money
  • Play Pokies Online Australia
  • High 5 Casino Real Slots
  • The Best Online Pokies
  • Online Pokies That Accept Paypal
  • Heart Of Vegas Slots
  • How To Play Online Roulette
  • Best Poker App Real Money
  • Best Online Casino Fast Payout
  • Best Slots At Wind Creek Casino
  • Online Casino 10 Minimum Deposit
  • Play Roulette Online For Money
  • Us Real Money Poker Sites
  • How To Win In Online Casino
  • Best Online Pokies Australia Review
  • Where To Play Roulette Online For Real Money
  • How To Beat Online Casino Slot Machines
  • Highest Payout Online Slots
  • Best Paying Online Casino Slots
  • Golden Tiger Online Casino Review
  • Online Casino With Live Dealers
  • Play Roulette Online For Real Money
  • Best Slots To Play At Casino
  • Slot Machine Games Win Real Money
  • Most Popular Online Casino Games
  • Casino Slots App Real Money
  • Online Casino Real Money Canada
  • Online Real Money Pokies
  • Online Roulette Game Real Money
  • Online Casino Roulette Real Money
  • Best Place To Play Roulette Online
  • Online Casino Book Of Ra Paypal
  • Online Blackjack With Real Money
  • Play Online Blackjack For Real Money
  • Is There A Slot Machine App For Real Money
  • Royal Vegas Online Casino App
  • Best Casino Slots To Play
  • Most Popular Online Slots
  • Best Way To Win At Slots
  • Slots You Can Win Real Money
  • Play Roulette Online Real Money Usa
  • Online Casino Real Money Paypal
  • Online Casino Australia Legal
  • Treasures Of Troy Slots
  • Online Casino For Us Players
  • Where Can I Play Blackjack Online For Real Money
  • Online Casino Paypal Book Of Ra
  • Online Roulette For Real Money
  • Best Online Blackjack Real Money
  • Poker App For Real Money
  • Jackpot Magic Slots Facebook
  • Best Online Casino Real Money Usa
  • Best Online Casino New Zealand
  • The Four Kings Casino And Slots
  • How To Play Slots Online
  • Best Online Pokies Australia
  • Usa Online Slots Real Money
  • Real Money Casino Android App
  • Online Slot Machines That Pay Real Money
  • Online Pokies Real Money Nz
  • Online Pokies Real Money App
  • Play Igt Slots Online
  • Best Casino Slots To Win Money
  • Online Casino Business For Sale
  • Play N Go Slots
  • Poker Apps For Real Money
  • Lucky Slots Real Money
  • All Slots Online Casino
  • Best Online Pokies Real Money Australia
  • Online Pokies Win Real Money
  • Best Online Casinos For Roulette
  • Pay Slots For Real Money
  • Best Online Poker Real Money
  • Slots App Win Real Money
  • Play Online Roulette For Real Money
  • Is Ignition Casino Legit
  • Wheel Of Fortune Slots Online
  • Lotsa Slots Real Money
  • Video Poker Online Real Money
  • Online Slots Usa Real Money
  • Play Blackjack Online Real Money
  • Jackpot City Online Pokies
  • Video Slots Online Casino
  • Is 888 Casino Legit
  • Online Slot Games That Pay Real Money
  • Prepaid Visa Card Online Casino
  • How To Stop Online Gambling
  • Best Slots To Play Online
  • Online Blackjack For Real Money
  • Slot Apps For Real Money
  • Mobile Slots Win Real Money
  • Newsletter Sign Up

    About Us

    Global Law Experts is dedicated to providing exceptional legal services to clients around the world. With a vast network of highly skilled and experienced lawyers, we are committed to delivering innovative and tailored solutions to meet the diverse needs of our clients in various jurisdictions.

    Social Posts

    See More:

    Contact Us

    Stay Informed

    Join Mailing List

    GLE