Dubai Group to Sell Shuaa Stake to Abu Dhabi Financial Group

  • Deal worth 341 million dirhams at Tuesday’s closing price
  • Dubai Group held 48.36 percent stake in investment bank

Dubai-based investment bank Shuaa Capital PSC said its biggest shareholder agreed to sell its stake to Abu Dhabi Financial Group LLC in a deal potentially worth $93 million. Shuaa shares jumped.

Dubai Banking Group, a unit of investment company Dubai Group LLC, has “reached an agreement” with Abu Dhabi Financial Group for the 48.36 percent stake, Shuaa said in a statement to the local bourse on Wednesday. The completion of the sale is subject to regulatory approvals, it said. Shuaa’s stock jumped 5.7 percent in Dubai, as 41 million shares changed hands, or more than three times the average of the past three months.

We have found in ADFG “a strong, strategic partner to support SHUAA’s future development and long-term growth prospects,” Fadel Al Ali, chairman of Dubai Group said in a separate statement. ADFG will explore opportunities for synergies with Shuaa across the full spectrum of the company, as well as enhancing Shuaa’s deal flow through leveraging ADFG’s extensive network, according to the statement.

The stake is worth 341 million dirhams ($93 million) at yesterday’s closing price, according to Bloomberg calculations. Dubai Group hired Emirates NBD PJSC, the United Arab Emirates’ biggest bank, to help find a buyer, people familiar with the plan said in April, as it strives to meet payment obligations under a debt restructuring plan.

Dubai Group, owned by emirate’s ruler, was one of several companies forced to restructure loans and delay payments when Dubai property prices slumped and credit markets froze after the 2008 global financial crisis. The company reached a final agreement with lenders to restructure $6 billion in debt in 2014 after three years of talks.

Shuaa’s Loss

Shuaa posted a 190 million-dirham loss last year, its worst performance since 2011. Most of these losses were attributable to Gulf Finance, its small and medium enterprise lending business, it said. The company had four chief executives in the five years through 2013, and has managed without one since then.

“Shuaa didn’t realize its potential as a regional investment bank,” Sanyalak Manibhandu, the head of research at NBAD Securities LLC, a unit of Abu Dhabi’s biggest bank, said in an e-mail. “Shuaa has made money from its credit business and some money from investment banking and corporate finance, not from brokering.”

Abu Dhabi Financial Group, which was founded in 2011, is an alternative-investment company primarily focused on financial services and real estate in the six-nation Gulf Cooperation Council, the U.K. and Eastern Europe, according to its website. Assets under management have climbed to over $3.5 billion, according to the statement.

ADFG bought London’s New Scotland Yard in 2014 for 270 million pounds ($381 million) and won approval earlier this year to tear down the former metropolitan police headquarters in the Westminster borough and develop six towers with 268 homes. In February, an ADFG subsidiary increased its stake in Bahrain-based GFH Financial Group to 10 percent, making it the largest shareholder.

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