Abu Dhabi Financial Group (ADFG) and SHUAA Capital (SHUAA) have agreed to merge their businesses to create an entity with $12.8bn (£10.1bn) in total assets under management (AUM).

ADFG

Image: ADFG merges with SHUAA to create £10.1bn AUM entity. Photo: Courtesy of Gerd Altmann/Pixabay.

As part of the deal, SHUAA will issue 1.4 billion new shares to ADFG’s parent company Abu Dhabi Capital Management, in return for the entire share capital of ADFG. Upon completion of the deal, Abu Dhabi Capital Management will own 58% stake in the merged entity.

To demonstrate its commitment to the deal, Abu Dhabi Capital Management has agreed for a 12-month lock-up period for the new SHUAA shares from the date of admission. The deal represents 60% premium for the undisturbed share price of SHUAA.

The combined entity is expected to provide its customers with a wide range of product suite across the financial services value chain.

With full-service offering, the combined entity could deepen existing client relationships through its distribution network spread regionally and internationally.

Furthermore, the new entity will allow significant shareholder value creation through synergies, driven by cross-selling, elimination of overlapping functions and access to new geographies, while diversifying revenue streams and improved earnings visibility.

SHUAA CEO Fawad Tariq Khan said: “We believe that there is a compelling strategic rationale in bringing together the two businesses, whereby the sum of the two is greater than its constituents.

“Having made excellent progress in turning our business around over the past three years, supported by ADFG as a major shareholder, we now see the potential to accelerate SHUAA’s growth.

“The combined business will benefit from considerable synergies, an expansive distribution network and a deep pool of talent. All of this will help drive the business performance and create real and long-term sustainable value for shareholders of both companies.”

The new entity is expected to be rebranded as ADFG, but will remain listed on Dubai Financial Market.

Subject to SHUAA shareholder approval and customary regulatory approval, the merger deal is expected to be completed in the third quarter of this year.

ADFG CEO Jassim Alseddiqi said: “This is a milestone transaction for our business as well as the regional financial services industry.

“We believe that there is a compelling investment proposition to establish a regional financial services powerhouse by bringing together two market leaders in their respective areas, ADFG and SHUAA.

“This combination will enable us to leverage ADFG’s pioneering products and services across a far broader distribution platform, bringing significant synergies to the enlarged entity.”