"We believe that the combined entity would be in a strong position to achieve several economies of scale in their respective operating business segments and create value for the shareholders over the medium- to long-term perspective. We would need to see the implementation of a post‐merger strategy and eventual value unlocking, going forward. With this background we remain positive on the upcoming merger, which would create a robust entity, a report from the brokerage firm said.
Based on successful approvals, GBCM expects the merger to be completed by the end of the third quarter of this year.
Ominvest had initiated the process, in July of 2014, to explore a possibility to form a strategic arrangement with ONIC to look at growth opportunities. In December last year, both the companies signed a memorandum of understanding (MoU) to explore the viability of a merger.
Last month, the board of both entities concluded that due diligence supported the case for a merger and approved the same on the same terms as outlined in the MoU.
The proposed merger is subject to approvals from both sets of shareholders, legal, regulatory approvals from the Central Bank of Oman, the Capital Market Authority and also the Ministry of Commerce and Industry. Extraordinary general meetings (EGMs) of both companies are scheduled to meet on May 31 to approve the merger.
The merged entity would emerge as a stronghold in the financial sector with two major subsidiaries, Oman Arab Bank - in which Ominvest owns a 51 per cent stake - and National Life and General Insurance Co (NLGIC) - in which ONIC has a 98 per cent holding. "Both these entities contribute significantly to the individual entities and are perceived to be hidden gems for the merged holding company. Profit from OAB forms a significant portion of Ominvest profits and NLGIC contributed to 38 per cent of ONIC profits in 2014. Added to that, the merged entity in its portfolio would have two leasing companies as associates (Oman Orix and National Finance), entities in the industrial sector (Oman Chlorine, Nabil, National Detergent, Modern Steel etc) and also international insurance subsidiaries. We believe the management of the combined entity would look at achieving higher market share in individual business sectors along with the aim of creating a consolidated structure which would enhance shareholders wealth going forward," GBCM said.
According to the report, over the medium term, depending upon market conditions, the combined entity would look at listing of OAB and NLGIC in the local market, which would create significant value unlocking potential. "The merged entity would bring in strong promoters, which include Al Hilal (a 100 per cent subsidiary of Zubair Corp), Oman Investment Fund, Civil Services Pension Fund, Al Anwar and Orix Corporation. We believe with the strong shareholder support and experience, the combined entity would be in a stronger position to go ahead with new investment opportunities," it added.