Bahrain-Based Investment Group to Acquire 75% Stake in Faysal Bank Joint Venture

Faysal Bank Joint Venture

Ithmaar Holding, the parent company of Faysal Bank Limited (PSX: FABL), convened its Extraordinary General Meeting (EOGM) on Wednesday to secure approval from its shareholders for the proposed sale and transfer of certain assets. Under this arrangement, Bahrain-based GFH Financial Group will acquire a 75 percent stake in Ithmaar Bank (Faysal Bank JV).

According to a brief note from Topline Securities, the shareholders have granted approval for the proposed sale and transfer of assets valued at US$ 695-715 million and liabilities estimated at around US$ 665-695 million.Initially, a 66.67 percent stake in Faysal Bank will be transferred to a company wholly owned by Ithmaar Holding, known as Faysal Bank JV, subject to local regulatory approval. Subsequently, 75 percent of the issued capital of Faysal Bank JV will be transferred to GFH Financial Group.As part of the agreement, GFH will receive an annual preferred return of 12 percent Return on Equity (ROE) on a cumulative accrual basis for a period of 5 years. The implications of this on Faysal Bank’s payout policy are yet to be clarified.The transfer of shareholding to Faysal Bank JV is designed to facilitate the transaction smoothly without involving foreign currency transactions. Ithmaar Holding will indirectly divest its stake in Faysal Bank by selling its interest in Faysal Bank JV.Additionally, on May 25, 2024, Ithmaar sold a 5.76 percent stake in Faisal Islamic Bank of Egypt to an undisclosed buyer for US$ 34.8 million. This transaction brings the total value of the Egypt Bank to US$ 604 million, indicating a Price-to-Book (P/B) ratio of approximately 1.0x.Currently, FABL is trading at a P/B ratio of 0.74x.GFH Financial Group, headquartered in Bahrain, is engaged in various financial investment activities. Their recent communications have also indicated discussions regarding the acquisition of Ithmaar’s Financing and Investment Portfolios.