GFH to buy 100% of Khaleeji Commercial Bank to boost its portfolio

GFH Financial Group, an investment bank based in Bahrain, plans to acquire 100 per cent of Khaleeji Commercial Bank (KHCB) to boost its portfolio and expand its operations, it said in a regulatory filing on Sunday.

The Bahrain lender submitted an offer to the board of KHCB to acquire 21.03 per cent of the its shares, which it currently does not own, by way of shares exchange, GFH said in a statement to Dubai Financial Market, where its shares are traded.

“GFH intends to maintain KHCB's commercial registration and vocation as an Islamic retail bank,” GFH said. “KHCB will continue to operate under its normal course of business and maintain its operations as a subsidiary of GFH.”

GFH, which has more than $12 billion in assets and funds under management, increased its shareholding in KHCB earlier this year to more than 69 per cent after it bought shares from Dubai-based Shuaa Capital and the Goldilocks Fund, which is managed by a Shuaa subsidiary.

GFH bought Shuaa Capital’s direct 3.8 per cent stake in KHCB and its 9.76 per cent indirect shareholding from the Goldilocks fund, equal to more than 87 million shares.

The Bahrain-based Sharia compliant lender, which owned a 55.41 per cent stake in KHCB before the deal, paid more than 8.76 million Bahraini dinars ($23.3m) for Shuaa's combined shareholding, it said in June.

GFH's latest offer will be put into effect by way of a voluntary conditional offer to the shareholders of KHCB in line with the provisions of the Takeovers, Mergers and Acquisitions Module, it said.

If the Bahraini lender secures a shareholder acceptance of 90 per cent to acquire KHCB shares, then it intends “to exercise any rights of compulsory acquisition, which may become available to it”, it said.

“The remaining shareholders, who have not accepted the acquisition offer, shall be obliged to sell their shares to GFH in no later than three months from the date of GFH having obtained 90 per cent or more acceptances.”

Banks in the GCC are looking to merge or take over other financial institutions to gain scale and expand their footprint as regional economies emerge from the coronavirus-induced economic slowdown.

The acquisition of KHCB “will provide GFH with access to a wider segment of clients and allow for a bigger market share”, it said.

“Commercial banking provides stability to GFH’s profitability and risk profile and, hence, is considered a key pillar to GFH’s strategic growth plan.”

GFH more than doubled its net profit for the second quarter of 2021, driven by growth across its business units despite the lingering effects of the Covid-19 pandemic.