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ADFG, Shuaa merger creates financial services powerhouse

Under the merger, SHUAA agrees to issue 1.47 billion in new SHUAA shares to Abu Dhabi Capital Management in return for ADFG's entire issued share capital.

Abu Dhabi Capital Management, the strategic investor, will own 58 percent of the enlarged entity "There is a compelling investment proposition ... by bringing together two market leaders in their respective areas" The ADFG-SHUAA merger is expected to offer customers a pan-regional, one-stop financial services platform

Abu Dhabi Financial Group L.L.C (ADFG), a leading investment group in the region, and SHUAA Capital PJSC (SHUAA), a market leader in regional investment banking and capital markets, announced that they have agreed terms to merge the two businesses that could see the establishment of an asset management and investment banking powerhouse in the region.

Under the merger terms, SHUAA has agreed to issue 1.47 billion in new SHUAA shares to ADFG’s parent company Abu Dhabi Capital Management in return for the entire issued share capital of ADFG. This means that Abu Dhabi Capital Management, the strategic investor, will own 58 percent of the enlarged entity. The new SHUAA shares, however, will be subject to a 12-month lock-up from the date of admission as a demonstration of the strategic investor's commitment to the merger. The agreed valuation represents a 60 percent premium to the undisturbed SHUAA share price.

Following the admission of the new SHUAA shares, the issued share capital of SHUAA will increase from about 1.06 billion to 2.53 billion SHUAA shares. The combined entity will remain listed on Dubai Financial Market and is expected to be rebranded as “ADFG”.

"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. Having seen consolidation of the banking industry in our region, the wider financial services industry is ripe to benefit from the same process and we are proud to be leading the way with this transaction. We are excited about the future prospects for the combined entity and our ability to create significant value for all shareholders,” said Jassim Alseddiqi, CEO of ADFG.

The ADFG-SHUAA merger is expected to offer customers a pan-regional, one-stop financial services platform, with an enhanced product suite across the financial services value chain. The merger also provides SHUAA with access to proprietary transaction flows from within the broader ADFG ecosystem which will be highly beneficial across combined entity’s enlarged customer base.

“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,” said Fawad Tariq Khan, CEO of SHUAA.

Including ADFG’s assets under management (AUM) of over $11.5 billion, the combined entity will boast $12.8 billion in AUM. The merger will further provide the combined entity with access to SHUAA's customer base, and differentiated paths to value for clients in the asset management business.