Dubai Banking to buy into Shuaa Capital

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State-controlled Dubai Banking Group (DBG) will buy a 32% stake in Shuaa Capital, the UAE's largest investment bank by market value, through a 1.5 billion dirham ($408.5 million) convertible bonds deal, Shuaa said on Sunday.

DBG, the parent company of Dubai Bank, would buy the bonds that will convert into 250 million shares of Shuaa at 6 dirhams per share, Shuaa said in a statement without giving the maturity of the bonds. Shuaa shares closed on Sunday at 5.31 dirhams, up 4.32%.

Shuaa said in the statement issued after the market closed that it also plans to raise the ceiling on foreign ownership to 49% from 40%.

"We have identified DBG as a long-term partner to work with, and have reached agreement in principle with them," Shuaa Capital Chairman Majid Saif al-Ghurair said in the statement.

Shuaa Capital's board will call an extra-ordinary shareholders meeting on August 5 to seek investors' approval.

The funds would help Shuaa Capital's expansion in the United Arab Emirates in the region.

"The financial service industry in the region is developing in a rapid way but still with substantial room for both expansion and consolidation," Shuaa Capital Chief Executive Iyad Duwaji said.

"A strategic tie up with DBG would allow us to realise synergies from their commercial banking operation, and from being closely associated with two of the most dynamic groups in the UAE, Dubai Holding and Emaar."

State-owned Dubai Holding owns 70% of DBG, while the rest is held by Emaar Properties, the Arab world's largest developer by market value.

"Our aim is to preserve our first mover advantage and strengthen our leading position in the region in the face of emerging competition and increasing competition," Duwaji said.

Dubai Holding in March took a majority stake in Emaar by exchanging land for $7.6 billion worth of stock, but details of the deal are yet to be disclosed.

Abdul-Aziz al-Muhairi, managing director of DBG and CEO of Dubai Bank said the transaction also involves DBG's funding of all outstanding liabilities of Shuaa's stock option plan, amounting to 176 million dirhams.

DBG has retained Deloitte and Touche Middle East to both advise and provide due diligence services in connection with the deal, he said.

A separate announcement said that shareholders of Shuaa Capital had approved plans for a 20% cash dividend. Investors holding shares on July 4 would qualify for the payment, it said in a statement on the Dubai bourse website.

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