Oman’s Bank Dhofar, Omnivest submit competing bids for Ahli Bank

Oman’s Ahli Bank has received a revised offer from Bank Dhofar just a day after a consortium led by Oman International Development and Investment Company (Omnivest) said it plans to bid for the lender.

Ahli Bank’s board of directors rejected Bank Dhofar’s offer for a potential merger earlier in April without providing a reason for the decision.

Bank Dhofar, in its revised offer, said a potential merger with Ahli Bank would provide a ‘compelling opportunity’ for shareholders, without providing further details. “Further to our communication on April 10, 2023 announcing the submission of a non-binding offer to the board of Ahli Bank and having considered the board of directors’ response, Bank Dhofar has resolved to submit a revised non-binding offer,” the lender said in a bourse filing.

Meanwhile, the revised bid from Bank Dhofar comes a day after Omnivest said it would lead a consortium that will make an offer for the entire issued share capital of Ahli Bank. The offer will be made by entities separately controlled by Omnivest and Arab Bank.

“The consortium will make a cash offer of 185 baizas (base offer per share),” Omnivest said in a statement, which values Ahli Bank around OMR360.7m.

This base offer price presents a premium of approximately 28 per cent over Ahli Bank’s average one-year market price of 144 baizas or 20 per cent of the bank’s net book value as of March 31, 2023.

The Omnivest-led consortium already owns a “substantial stake in Oman Arab bank (OAB) and plans to merge Ahli Bank with OAB.

Ahli Bank, which is partly owned by Bahrain’s Ahli United Bank, said its board will study the revised non-binding proposal from Bank Dhofar. The board will also review the letter of intent from Omnivest consortium.

Muscat-based Bank Dhofar has OMR4.6bn in assets while its smaller competitor, which is partly owned by Bahrain’s Ahli United Bank (AUB), has just under OMR3.1bn in assets as of March 31, 2023.

The bank has attempted to merge with other local lenders in the past with no success. It was previously in talks to merge with the National Bank of Oman, but the negotiations were called off in 2019.

Oman bank merger and acquisitions

Meanwhile, Sohar International Bank received the central bank’s approval to merge with HSBC Bank Oman in February and the deal is expected to close in the second half of this year.

Sohar International is also linked with a potential merger with Omani Islamic lender Bank Nizwa. Both proposed mergers are subject to regulatory and shareholder approval.

Fitch Ratings said the fragmentation in the GCC region’s banking system is greater compared to other emerging markets, with many banks resulting in strong competition and weak pricing power.

The merger and acquisition (M&A) activity in the region is and will continue to be a driver of transformation in the financial sector as incumbents look for strategic partnerships and consolidation opportunities to boost digital capabilities, counter the disruption from digital attackers and address sustained pressure from regulators.

In March, Standard Chartered Bank entered into an agreement with Arab Jordan Investment Bank (AJIB), subject to central bank approval, which will see the London Stock Exchange-listed lender sell its corporate, commercial and institutional banking, consumer lending and private banking businesses in Jordan to AJIB.

The scale achieved from bank mergers in the GCC is leading to improved liquidity management, enhanced profitability and reduced inefficiencies with better cost-to-income ratios. Kuwait Finance House completed its acquisition of Bahrain’s AUB in October 2022 – a rare cross-border tie-up that had been almost four years in the making.