BankMuscat, IBO confirm merger
(Shareholders to get compulsory convertible bonds)

The share conversion ratio of the merging banks - Industrial Bank of Oman (IBO) and BankMuscat - has been finalized by the boards of both banks, according to joint press release. This is yet a further move by BankMuscat to strengthen its position in the market. According to the proposal, the shareholders of IBO will receive a compulsory convertible bond for each share, having a nominal value equal to the audited book value per IBO share with effect from the date of the merger. The effective date for the merger envisaged is 31 December 2001, subject to the requisite approvals.

"The compulsory convertible bonds to be issued as merger consideration shall form part of the merged bank's permanent (tier 1) capital", the bank said in a statement. However, the proposed merger terms are subject to the approval of the Ministry of Commerce and Industry, the Capital Market Authority and the Central Bank of Oman.
The convertible bonds will be issue for statutory minimum period of two years, after which the bonds shall automatically convert into ordinary shares of BankMuscat, at a ratio based on the nominal value per convertible bond, as against the then weighted average daily closing market price per BankMuscat share as quoted on the MSM in the 3 months ending 31 December 2003.

The convertible bondholders will get an 8.5 per cent annual interest payable on 30 June and 31 December in each year, with the final interest payment to be paid on 31 December, 2003. Applications will be made to the MSM for a listing of the convertible bonds and the merged entity will retain the name as BankMuscat. If the nominal value per convertible bond in RO 1.100, and if the weighted average daily closing market price per BankMuscat share as quoted on the Muscat Security Market (MSM) in the three months ending 31 December 2003 is RO 3.300, the swap ratio of 3 convertible bonds in exchange for one BankMuscat share will apply.

The proposed merger will bring IBO the benefit of becoming a part of the largest Omani banking group. Integrating operations and resources will lead to sustained cost savings for both banks. The merger will bring about an increase in overall tier-1 capital, which may be used by the combined bank towards future organic asset growth and absorption of acquired asset expansion. The immediate effect of the merger on earnings per share of BankMuscat will be negligible, but in the medium to longer term, the enlarged capital base will permit asset growth. Notices for extraordinary shareholder meetings are being prepared and will be issued shortly.

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