Mubasher: Kuwait Finance House (KFH) has offered to buy Ahli United Bank – Bahrain (AUB Bahrain) in an all-share deal that is valued at about $8.8 billion, Bloomberg reported.

The Kuwaiti lender plans to issue 1 share for every 2.325581 shares of AUB Bahrain. In January, the banks’ advisers had recommended the same swap ratio.

The new combined entity will potentially become the GCC’s sixth-biggest lender with $100 billion in assets, Bloomberg said, highlighting that the deal value was based on the lenders’ closing price on Thursday, 12 September.

KFH shares have increased by 27% to 707 fils, while AUB Bahrain shares were up by 51% to 94.1 cents.

The swap ratio is fair and the merger “will create substantial cost synergies in Bahrain and Kuwait,” Jaap Meijer, the Dubai-based head of research at Arqaam Capital, told Bloomberg by email.

“He expects a 24.8% rise in KFH’s earnings and the combination to boost its return on equity by 2.7 percentage points, driven by the cost synergies, AUB’s better asset quality, higher growth prospects and strong capital,” according to Bloomberg.

It is worth noting that HSBC Holdings and Credit Suisse Group were advising KFH and AUB Bahrain on the merger talks.

On 12 September, KFH’s board of directors approved the advisers’ reports and due-diligence review results, in addition to the final exchange ratio between the shares of KFH and AUB Bahrain.

On 8 September, KFH announced that it had received all reports by the international advisers appointed by the bank to do technical and legal due-diligence investigations related to the potential merger of AUB Bahrain.