The two companies had signed a memorandum of understanding (MoU) in December last to explore the possibility of a merger by incorporation.
In a disclosure to the Muscat Securities Market (MSM) on Monday, Ominvest said, “On April 19, the board of directors of Ominvest met to review the findings of the due diligence completed by the consultants engaged by both the companies. The board concluded that the results of the due diligence were quite satisfactory and supported the case for the proposed merger. As a result, the board has approved the proposed merger on the same terms as outlined in the MoU.
The initial understanding as per the MoU is that ONIC’s shareholders will be allotted such number of new voting shares in the capital of Ominvest as equates to a post-merger 33 per cent shareholding in Ominvest, both companies said in their filings in December.
The companies added that this percentage is a preliminary indication of value and may be subject to change following due diligence.
In a separate disclosure on Monday, ONIC said, “In light of satisfactory completion of due diligence; the board of directors of ONIC has approved the proposed merger on the same terms as agreed in the MoU.”
According to Joice Mathew, senior manager for research at United Securities, the merger is beneficial for the shareholders of both the companies as it will create a stronger entity with significant stakes in the entire spectrum of financial services in Oman ranging from investment to insurance to banking. “Additionally, this move should help the companies to search for scaled-up opportunities in other sectors. For example, the Salalah Resort project which is initiated by Ominvest is a billion-dollar project and the combined entity with a stronger balance sheet could raise funds with relative ease.”
ONIC rose the most on the MSM on Monday, adding five per cent to 462bz, while Ominvest gained 3.64 per cent to 456bz on the back of the announcements.
The merger is subject to approvals from the respective shareholders; and all necessary legal, regulatory, and other approvals including approvals required from Capital Market Authority, the Ministry of Commerce and Industry and other relevant authorities, the companies said.
”The shareholders of the new entity will have indirect stakes in Oman Arab Bank, National Life and General Insurance Co, National Finance, Oman Orix Leasing, Al Ahlia Insurance Co, and Oman Chlorine. Additionally, it will have stakes in International General Insurance in UAE, Budva Beach Properties in Montenegro, Nabil and National Detergents. The stake in two local leasing companies and another leasing company in Bahrain provides them and an opportunity to search for further consolidation among local leasing sector companies, or grow the Islamic business side of OAB.
”If the current prices are of any indication, the merged entity is likely to be one of the top ten companies by market cap in MSM,” Mathew added.
Earlier this month, Ominvest had reported a first-quarter profit growth of 37 per cent.
Further details on the proposed merger will be included in an information memorandum, which will be provided to the shareholders at the respective extraordinary general meeting (EGM) to be convened in the due course, the companies added in their Monday disclosure to MSM.