(MENAFN - Khaleej Times) Dubai Islamic Bank (DIB) plans to acquire 100 per cent shares of its Islamic housing finance provider Tamweel through a share swap.
Dubai's largest Sharia-compliant bank, which already has a majority stake in Tamweel, intends to make a tender to buy all shares from other shareholders.
The bank's board meeting on Thursday approved the plan to offer each Tamweel shareholder 10 DIB shares for every 18 Tamweel shares. DIB, which already has a majority stake of 58.2 per cent, is looking to buy 41.8 per cent of the issued shares.
DIB deputy chief executive officer Dr Adnan Chilwan told Khaleej Times that both parties will benefit from the move and that after the takeover, the bank will able to combine the mortgage portfolio at one place.
"It's our intention and needs a lot of regulator approvals. Once we get the approvals, the transaction will be confirmed," Chilwan added.
Dr Nasser Saidi, former chief economist at Dubai International Financial Centre, said: "The UAE mortgage sector needs a strong boost to expand to its former glory. The DIB's takeover of Tamweel would certainly revitalise the UAE's real estate market, given DIB's past experience in the field, and is likely to contribute towards the re-emergence of a stronger mortgage sector."
Talking about the main beneficiaries, Mohammed Ali Yasin, managing director of National Bank of Abu Dhabi Securities, said Tamweel shareholders should be happy as they will get the benefit to own shares of a bigger bank, which has more than one revenue model.
Yasin, however, added: "This has really confirmed the failure of independent mortgage financing companies in the UAE and may be in the GCC as well."
They have to be part of a bigger bank, as that model requires continuous cash injections, Yasin said.
Shares of Tamweel and Amlak, another Islamic mortgage provider, were halted in 2008 after the government announced plans to merge the two lenders and inject cash to help them cope with the financial crisis.
The plan was abandoned after DIB increased its stake in Tamweel to 58 per cent in 2010. Tamweel stocks, which resumed trading in May 2011, will be delisted from the Dubai Financial Market after the completion of the takeover.
The current market value of Tamweel is about Dh1.19 billion. Before the announcement, stocks of Tamweel ended 2.5 per cent lower on Thursday while the bank was up 1.5 per cent.
Tamweel is expected to be among the companies most affected by a new UAE Central Bank regulation to cap the size of mortgage loans for foreigners and local citizens.
A statement said that it is the intention of DIB, subject to obtaining necessary approvals of an extraordinary general assembly of DIB shareholders, to issue new shares by way of a capital increase of the bank's issued share capital in accordance with the Commercial Companies Law. The new DIB shares will be issued and capitalised through the transfer of Tamweel shares subject to the acceptance value of the offer, the statement said.
Upon approval of all regulators, including the Ministry of Economy, the Securities and Commodities Authority of the UAE, the UAE Central Bank and the Dubai Financial Market, the date of the offer will be communicated individually to all Tamweel shareholders giving them adequate time to respond to the offer.
The bank is confident that this offer serves the best interest of shareholders in both entities. It gives every Tamweel shareholder the opportunity to become a shareholder in a more lucrative and sizeable entity with a relatively liquid market in its shares whilst remaining exposed to the same industry sector and the Tamweel business itself.