MANAMA: Bahrain-based Islamic banks Capivest, Elaf Bank and Capital Management House will be voting on a proposed merger of the three banks by the end of this month.
If the deal goes ahead, it will create a Sharia-compliant institution with shareholders' equity of almost $350 million and assets in excess of $400m, which would give them a scale that would make them more competitive in the market.
The transaction is the first three-way merger to take place in Bahrain.
The banks are being advised on the merger by Kuwait Finance House-Bahrain (KFH-Bahrain).
In addition to shareholder approval, the merger is subject to regulatory and other approvals and is expected to be completed within the second half of 2012.
The expertise and services of the three banks complement each other which will enable the new entity to streamline the three-way integration.
A larger capital base, in context of limited capital available to such investment companies, make it well equipped to address a wider set of opportunities more quickly within the growing Islamic banking and investment market.
The merger may prove to be a model and a catalyst to further mergers in the Bahrain Islamic banking market.
The proposed merger was announced in September last year and since then, the three banks have been meeting regularly to discuss the details of the transaction.
The due diligence and valuation exercise has already been formally completed.
"We are very pleased that the steering committee has reached in principle agreement on the rationale and benefits of the merger," said KFH-Bahrain managing director and chief executive Abdulhakeem Alkhayyat.
"Representatives of the three banks and support teams worked diligently and seriously to conclude a deal to benefit all parties.
"The merger is expected to be transformational for the three banks and it is anticipated to bring significant benefits to their potential customers, shareholders and wider stakeholders in Bahrain," he said.
"This merger will strengthen the banks' capital bases and will result in creating a stronger financial institution with a diversified shareholder mix.
"I personally believe that it has all the right ingredients necessary for success," he said.
"We thank the Central Bank of Bahrain for their support throughout the merger process in seeing this deal conclude fairly.
"This merger is in line with the Bahrain government's efforts to enhance the banking sector and reinforce the kingdom's position as a regional and international financial hub," he said.
'It sends a very positive signal to investors in the market," he added.