Abu Dhabi-listed Finance House is to buy privately-owned investment bank CAPM Investment to expand into investment banking and asset management, three sources familiar with the matter said on Thursday.
Under an agreement between the two parties, Finance House will acquire CAPM's investment banking and asset management licence, offering a premium of between 5 to 10 percent to the value of those businesses, one of the sources said speaking on condition of anonymity.
CAPM was capitalised at AED100m (US$27.2m). Its liquid assets are estimated at around AED40m while the brokerage business is valued at around AED55m to AED60m, the source said. However, the brokerage business is excluded from the deal as it will be wound up.
"It is a done deal between the two companies. The UAE Central Bank's approval is awaited," a second source said speaking on condition of anonymity.
"The acquisition helps Finance House to complete its portfolio and offer investment products, advisory etc under the investment bank umbrella," the source added.
A third source said Finance House was most likely to merge CAPM with its DIFC-based (Dubai International Financial Centre)unit, Finance House Capital, although a final decision on this is yet to be taken.
The sources declined to be named as the deal has not been made public yet. Finance House officials declined to comment. A CAPM official, who declined to be identified, said the company's shareholders approved the sale on Monday.
Investment banks and brokerages in the Gulf Arab region are under pressure to consolidate as slumping market turnover and weak asset values put their survival in doubt.
Ninety brokerages are licenced to trade the two domestic bourses in the UAE, Dubai Financial Market and Abu Dhabi Securities Exchange, according to the Securities and Commodities Authority.
But this number may now have fallen by more than half as many of them have asked for their licences to be suspended or have shut themselves down completely, securities analysts say.