Bahrain’s Gulf Finance House (GFH) is in talks on buying two asset management firms for a total of up to $500 million and is planning to increase debt to finance the deals as it builds a diversified financial group, its chief told Reuters.
The Islamic investment firm is rolling out a new strategy having suffered like many regional peers in the wake of the global financial crisis, as asset values slumped, real estate transactions evaporated and short-term debt taken on during the boom years became unserviceable.
Several debt restructurings were required by GFH in an attempt to right itself and implement its new strategy. It now has about $190 million of long-term debt, including two Islamic syndicated loans as well as Islamic bonds, or sukuk, which mature in 2018.
GFH plans to acquire established regional companies to build a broader wealth management platform, rather than offer new business lines, said Chief Executive Hisham al-Rayes, though he did not identify any targets.
The first acquisition is planned in the next three to 12 months, he added.
“They will be focused entities in mutual funds and asset management with their own set of clients and funds. Currently we are talking to two entities and the transactions would be in the range of $150 million to $250 million per transaction.”
He said GFH planned to issue fresh debt to finance the deals, with a preference for using sukuk over syndicated loans.
“We are in a growth phase with plans to undertake some acquisitions. In light of that, we are therefore planning to increase our leverage,” he said. “Presently our debt-to-equity ratio is only 0.3 to 1, versus the industry norm of 1 to 1.”
GFH also plans to raise its stake in Islamic lender Khaleeji Commercial Bank to consolidate its financials at the group level. GFH said last week it planned to increase its stake in Khaleeji to as much as 54 per cent from 47 per cent currently, pending regulatory approval.
Khaleeji and unlisted Bahraini lender Bank Al Khair dropped merger plans in March after they failed to agree terms.