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The merger will be supported by a €500m ($707m) cash injection from Qatar-backed Paramount Services Holding, which already owns 4% of Alpha and will effectively own 17% of the merged lender. The money will be injected through mandatory convertible bonds, and if approved the merger will create southeast Europe's biggest bank, and the 22nd largest bank in Europe.
Analysts conceded that the move was a surprise when it was announced last month. However, it sits neatly alongside the widely-held view that Qatar is looking to become Europe's preferred supplier of gas in the future. By helping to prop up the European banking sector, the tiny Gulf nation is showing solidarity with a region which is going through its toughest days since the 17-nation bloc was established in 1999.
Qatar capitalises on European strategic investments
Paramount Services Holding is just one of the many vehicles which represent the interests of the Qatari royal family. And it's not the Gulf state's first brush with Europe, either: in August last year Qatar snapped up a 2% stake in the power company Energias de Portugal, worth around €160m. Last September Qatar signed an agreement concerning potential investments totalling up to $5bn in the Greek economy across sectors ranging from banking to energy and real estate, and in March this year the Qatar Holding group acquired a 6% stake in the Spanish power company Iberdrola, worth around $2.8bn.
The Qataris are unlikely to be the only cash-rich Middle East investors who have spotted opportunities amid the trials of the European banking system. After all, as well as providing long-term strategic opportunities, the troubles of others often represent golden tickets to wealthy sovereign investors in a position to make sizable investments on favourable terms.
"[Gulf SWFs] will be heavily involved," predicts Gary Dugan, Chief Investment Officer, Private Banking, at Emirates NBD.
"If you think about transparent buckets of money around the world, it's very largely centred on the Middle East," he continues. "If you think of the concentration of free cash anywhere in the world, the Middle East is the capital of that. You might talk about the Singaporean government or a few other SWFs, but you're not going to go to the UK to raise money, and you're not going to go to the US because there's probably not one state pension fund there that's liquid."
Dugan - who recently published a note entitled 'Eurozone: You Are the Weakest Link' - anticipates that troubled European economies will already have extended feelers to cash-rich Gulf states. Indeed those feelers have probably been in place since the global financial crisis hit back in 2008, and debt-laden Western economies were first confronted with a meltdown that has since claimed the scalps of numerous political leaders and their governments.
"With good outcomes and bad outcomes, this region has provided over the last 12 months a number of support programmes for some of these countries," he says. "The Portuguese came around six to nine months ago looking to raise money and basically setting out their stall. The Irish government is also known to have gone cap-in-hand around the world looking for some support, and these countries aren't going out as the eurozone - they're going out as individual countries."
Lack of distressed asset classes
Not all are convinced that Gulf governments should be interceding in European economies.
Staff
