The AL-Baraka Bank (Pakistan) Limited (ABPL) has decided to purchase the Burj Bank Pakistan and has submitted a request to the State Bank of Pakistan (SBP) for final approval in this regard.
The ABPL bank will purchase the Burj Bank through swap Ratio of 1 share of ABPL for every 1.7 shares of Burj Bank for shareholders of Burj Bank, while its face value will be Rs 10 each in the ABPL for every 1.7 shares of Burj Bank.
The ABPL will finalise this merger in the 9th Extraordinary General Meeting (EGM) of the shareholders next Monday (August 22), in which, the shareholders will give final approval to the scheme of amalgamation. It will be proposed that the entire undertaking of the Burj Bank Limited including all the movable and immovable properties, assets and liabilities and all the rights and obligations be amalgamated with and into the ABPL (Scheme) under Section 48 of the Banking Companies Ordinance, 1962.
In April this year, the ABPL was allowed due-diligence of the Burj Bank for the amalgamation of two of the smaller entities in Pakistan’s banking industry. The two banks deal in Islamic products only.
The scheme for the amalgamation of Burj Bank with the ABPL has been approved by the Board of Directors of the ABPL and circulated to the members of the ABPL. It has been approved, adopted and agreed by the shareholders of the ABPL, a document of the 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 the SBP had also approved due-diligence for it.
Neither Al Baraka Bank nor the Burj Bank is listed on the stock exchange. This means that neither party is obligated to inform the public at large about the on-going due diligence exercise. Both banks were struggling to meet regulatory minimum capital requirements for the last many months.
Al Baraka is the sixth institution that was conducting due diligence of Burj Bank, a relatively small Islamic bank with 75-branch network across the country.
Summit Bank and the Bank of Khyber recently undertook due diligence of Burj Bank. Earlier, two of the largest banking institutions of the country, the National Bank of Pakistan (NBP) and MCB Bank also conducted the due diligence exercise. But instead of purchasing Burj Bank, the MCB Bank decided to set up its own Islamic banking subsidiary.
The NBP quoted a “depressingly low” price for a majority stake, which was rejected by the Burj bank.
Meanwhile the central bank has shot down an offer of a major real-estate group which also conducted a comprehensive review of the Burj Bank’s finances for a possible acquisition.
As of December 31, 2015, the Al Baraka Bank’s capital for regulatory purposes amounted to Rs 8.1 billion against 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 the 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, the 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 33.9 per cent of shares.
The Burj Bank continuously posted a loss in 2015. It had also posted a loss of Rs 379 million in a 9-month period of 2014.