BankMuscat to issue 3.5m rights shares

BankMuscat to issue 3.5m rights shares Issue aimed at acquiring ABN Amro Bahrain operations MUSCAT - BankMuscat would soon come out with rights issue of 3.5 million shares paving the way for acquiring the Bahrain operations of the Netherland-based ABN Amro Bank.The prevailing banking regulations in Oman stipulates that a bank has to raise its issued capital for establishing offshore operations and the rights issue is in compliance with the directives of the Central Bank of Oman (CBO).

With this issue, the bank's issues capital will increase by 7.7 per cent from 45,537 million shares to 49.037 million shares. BankMuscat scrip is currently quoting around RO 2.35 on the Muscat Security Market (MSM), and the issue price is expected to range between RO2.000 - 2.100. The issue is expected to open in mid-December. The issue will be fully underwritten by leading international financial institutions. "Oman market has seen several rights issues in the past. However, for the small investors, the expected price of RO2.000-2.100 wont be very attractive, because all those rights issues that the market witnessed in the past were at a higher premium. If the price is significantly below the market price (say a discount of over 25-30 per cent), it will revive the market sentiments," market men opined. According to sources, BankMuscat and ABN Amro will formally sign the acquisition pact on December 2 in Muscat. While, ABN Amro will formally hand over its Bahrain branch to BankMuscat on or before January 1, 2002 after signing the sale and purchase agreement (SPA). The bank has already decided to hold an extraordinary general meeting (EGM) of its shareholders on December 12, 2001 to decide on the proposed Industrial Bank of Oman (IBO) merger, and the issue of increasing the issued capital by way of a rights issue. At the time of going to the press, the board meeting of BankMuscat was in session taking final decisions on the Industrial Bank of Oman (IBO) merger, where BankMuscat will acquire all the assets, liabilities and reserves of IBO. 

The consideration proposed is that the existing shareholders of IBO will receive compulsorily convertible bonds in lieu of the existing shares. The convertibility of bonds into shares of BankMuscat will take place after two years. The conversion date of the convertible bond will not be later than April 30, 2004 or within 21 days of the record date of the final dividend payment in respect of BankMuscat shares for the financial year ending December 31, 2003; whichever is earlier.

The ration shall be 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 during the three months period ending December 31, 2003. The convertible bonds will receive interest at a rate of 8.5 per cent per annum, payable on June 30 and December 31, each year, with the final interest payment to be made on December 31, 2003.

The CBO has already issued the initial approval for ABN Amro deal and the bank will seek for the final approval after signing the agreement. The due diligence exercise for the acquisition was carried out by Ernst & Young, Bahrain, while Pricewatercoopers, Oman and Bahrain had carried out a study on the feasibility of the acquisition on behalf of BankMuscat.

ABN Amro is in the process of re-aligning its international operations through a competent global strategy. Lately, ABN Amro and Citibank reached an agreement regarding the sale of the majority of the activities of ABN Amro in Kenya, to Citibank, Kenya.

It has reached agreements to sell its consumer banking businesses in Chile and Venezuela to BankBoston and Banco del Caribe respectively. It has agreed to sell its 80 per cent stake in ABN Amro Securities, its Greek equity brokerage business, to General Bank of Greece.