Ahli United Bank: the $6.1bn buyout that never was

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Each week Arabian Business turns the spotlight on a leading company.

What's all the fuss about Ahli?

While Ahli United Bank (AUB) is based in small Bahrain, it has a much larger footprint. On the home front, it is the Kingdom's biggest lender, commands more than 20% market share in an extremely competitive environment, and has a market cap of US$5.9bn. AUB has stakes in banks in Kuwait, Egypt, Iraq, Qatar and Iran.

Who owns AUB?

The Kuwaiti Public Institution for Social Security owns 20%, Kuwait-based Tamdeen Investment Company has 13%, the government of Bahrain's pension funds hold 10%, Kuwaiti Sheikh Salah Al Sabah has a 5.60% stake, and Kuwait-based Global Express Company owns 5.30%. The rest (43% for those counting) is held by retail investors, and the company is listed on the Kuwaiti and Bahraini exchanges.

Wow! So Kuwait effectively owns Ahli?

In a way, yes. In 2000, AUB was formed through the merger of the Bahrain bank and Ahli United Bank (UK). The UK bank was formerly known as United Bank of Kuwait, and was established in 1966 to provide services for Kuwaiti clients while travelling to the UK.

OK. I get the Kuwaiti link. But why is a Qatari bank looking to acquire Ahli?

While the International Bank of Qatar (IBQ) technically launched the bid for AUB, Kuwaiti investors are behind it. Qatari companies are sitting on a pile of cash and are looking to expand into new countries and sectors, but IBQ is a relatively small entity with only about US$350m in equity. The National Bank of Kuwait (NBK), one of the biggest financial institutions in the Middle East, has a 20% stake in IBQ, and also manages the bank. NBK is aggressively seeking cross border M&As. Ahli Bank provides NBK (through its acquisition vehicle IBQ) with a strong GCC foothold, and a chance to expand into Iran and Egypt.

So is NBK, I mean the International Bank of Qatar, going to close the deal?

While the deal is rich - US$6.1bn in cash and another US$2.5bn in a share swap - and to most observers seemed to be a no-brainer, the talks have stalled. In a rather bizarre twist, AUB forbade IBQ to conduct due diligence, insisting that a neutral third party should be brought in to inspect the books. AUB also limited the process to one month rather than the normal three month period. The stated reason for denying IBQ the chance to conduct its due diligence is that AUB feared that if the deal did not go through, the bank would have needlessly opened its books during the process and exposed its balance sheet.

So the deal is off?

IBQ withdrew from the deal on Tuesday (as reported in a Kuwaiti newspaper) over the issue of access during due diligence. It looks like the deal with Kuwait is over, but three other Gulf investors are reportedly ready to make an offer. The region's banking takeover saga continues.

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