LONDON: Ahli United Bank (AUB), Bahrain’s largest lender, is evaluating a sale or a merger with a rival bank in a potential $5 billion deal, bankers familiar with the situation said.
An agreement of this size would be the largest banking transaction in the region for the past 20 years, according to Thomson Reuters data, beating Emirates Bank’s $3.7 billion acquisition of National Bank of Dubai in 2007 and Qatar National Bank’s $1.9 billion purchase of Societe Generale’s Egyptian business in 2012.
It could also mark a revival of significant M&A activity in the Gulf where mergers tend to be difficult because major shareholders – often governments or prominent families – can be reluctant to cede control unless they get a generous price.
AUB is one of only a few banks in the Gulf region with pan-Arab operations and as such offers scope for further growth in countries such as Egypt, where western banks are seeking to cut their exposure.
“A strategic review is underway in an effort to identify suitable investors,” said one of the sources who asked not to be named because the talks are private. “One way to do it is to combine AUB with another banking institution.”
AUB came close to a merger with a bank based in the Gulf Cooperation Council (GCC) area in 2010 but the financial crisis derailed the deal, said one banker who was involved in the talks but declined to name the bank.
Now AUB’s shareholders, which include funds owned by the governments of Kuwait and Bahrain, have resumed plans to cash out, bankers said. They also said any deal would be driven in particular by Kuwaiti shareholders’ willingness to monetize their investments.
AUB’s shares are up 14 percent since January and have risen by over a third in the past 12 months. The bank has a market value of $4.7 billion on the Bahrain Bourse and $3.5 billion on the Kuwait Stock Exchange.
AUB declined to comment. Shareholders in Kuwait and Bahrain were not available for comment.
Goldman Sachs, which had a role in the plans for a merger between AUB and a GCC peer in 2010, is expected to be involved if any deal happens. Goldman Sachs declined to comment.
AUB had originally been put up for sale in 2007 and attracted interest from both regional and international banks due to its broad reach across the region, said another banker who took part in the talks.