KARACHI: AL-Baraka Bank (Pakistan) Limited (ABPL), a Bahrain and Emirates joint entity, has decided to purchase ‘The Burj Bank Pakistan and submitted the same for this possible merger to the State Bank of Pakistan (SBP) for the final approval.
The ABPL bank will purchase the bank through swap Ratio of 1 Share of ABPL for every 1.7 Shares of Burj Bank for shareholders of Burj Bank and is hereby approved, while its face value will be of Rs 10 each in ABPL for 1.7 share of Burj Bank.
ABPL will finalize this merger in its 9th Extraordinary General meetings (EGM) of the Shareholders on next Monday (August 22, 2016), in which, the shareholders will give final approval of the scheme of Amalgamation wherein it will be proposed that the entire undertaking of Burj Bank Limited (Burj Bank) including all the movable and immovable properties, assets and liabilities and all the rights and obligations of Burj Bank be amalgamated with and into ABPL (Scheme) in terms of Section 48 of the Banking Companies Ordinance, 1962.
ABPL, the merged entity of Al Baraka Islamic Bank Pakistan (AIBP), the branch operations of Al Baraka Islamic Bank (AIB) Bahrain and Emirates Global Islamic Bank (Pakistan), commenced its operations in Pakistan on November 1, 2010 while Burj Bank Limited, also a joint ventures of Arab countries in Pakistan. The Burj Bank formerly known as Dawood Islamic Bank Limited (DIBL) in Pakistan 6th full-fledged Islamic commercial bank. This bank received license in May 2006 and officially commenced its operations in April 27, 2007.
In April this year, the ABPL was allowed for due-diligence of the Burj Bank for the amalgamation of two of the smaller entities in Pakistan’s banking industry. Both the banks deal in Islamic products only.
“The scheme for the amalgamation of Burj Bank with and into ABPL, in terms whereof the entire undertaking of Burj Bank including all movable and immovable properties, assets and liabilities and all the rights and obligations of Burj Bank are proposed to be amalgamated with and into ABPL (Scheme), which has been approved by the Board of Directors of ABPL and circulated to the members of ABPL, be and is hereby approved, adopted and agreed by the shareholders of ABPL, present personally or through proxy, subject to the completion of all formalities, regulatory consents and sanctioning of the Scheme by the State Bank of Pakistan (SBP),” a document of ABPL said.
The ABPL was the result of an initiative of the First Dawood Group, with the Islamic Corporation for the Development of the Private Sector (ICD) in Jeddah, Unicorn Investment Bank in Bahrain, Al Safat Investment Company in Kuwait, Gargash Enterprises (LLC) in Dubai, the Singapore-based entrepreneur Azam Essof Kolia and Shaikh Abdullah Mohammad Al-Romaizan, an entrepreneur from the Kingdom of Saudi Arabia. In July 2011, the bank was renamed as Burj Bank Ltd.
Summit Bank has also shown its interest to acquire the Burj Bank and SBP had also approved due-diligence for it.
Neither Al Baraka Bank nor Burj Bank is listed on the stock exchange. This means neither party is obligated to inform the public at large about the on-going due diligence exercise. Both the banks were struggling hard to meet regulatory minimum capital requirements for last many months.
Al Baraka is the sixth institution that was conducting due diligence of Burj Bank, a relatively small Islamic bank with 75 branches network across the country.
Summit Bank and Bank of Khyber recently undertook due diligence of Burj Bank. Earlier, two of the largest banking institutions of the country, National Bank of Pakistan (NBP) and MCB Bank, also conducted the due diligence exercise. Instead of purchasing Burj Bank, MCB Bank eventually decided to set up its own Islamic banking subsidiary, it is learnt.
The NBP quoted a “depressingly low” price for a majority stake, which was rejected the Burj bank.
Meanwhile the central bank has shot down an offer of a major real-estate group also conducted a comprehensive review of Burj Bank’s financial accounts for a possible acquisition.
As of December 31, 2015, Al Baraka Bank’s capital for regulatory purposes amounted to Rs 8.1 billion as opposed to the usual minimum capital requirement (MCR) of Rs 10 billion. The SBP has granted a relaxation to Al Baraka in this regard for the time being.
Major stockholders of Al Baraka Bank include Al Baraka Islamic Bank Bahrain (66.6 per cent), Mal Al Khaleej Investments (17.7 per cent) and Sheikh Tariq Bin Faisal Khalid Al Qassemi (11.5 per cent). Al Baraka’s net profit for 2015 amounted to Rs 240.4 million, up almost 65 per cent from a year ago.
According to the 2014 annual report, which is the latest full-year financial account available, Bahrain-based Bank Al-Khair is the largest shareholder in Burj Bank with 37.9 per cent stakes. It is followed by Jeddah-based Islamic Corporation for the Development of the Private Sector with a shareholding of 33.9 per cent.
Burj Bank continuously posted a loss in 2015 as opposed to the net loss of Rs 379 million it made in the same nine-month period of 2014.
However, the State Bank of Pakistan (SBP) has yet to approve this amalgamation of Burj Bank with and into ABPL.