Kuwait Finance House is considering offering a premium of about 35 percent to buy Bahrain’s Ahli United Bank BSC in a share swap deal that could create the Gulf’s sixth-biggest lender with $92 billion of assets, according to people familiar with the matter. The Kuwaiti lender may offer one share for every 2.1 in Ahli United Bank, the people said, asking not to be identified because the matter is private. That would value the deal at about $8 billion, according Bloomberg calculations.
The premium is based on the firms’ closing share prices Wednesday.
Ahli United Bank has advanced about 11 percent since the banks started talks in July, while Kuwait Finance House has gained around 0.5 percent.
The Bahraini bank may not accept the offer and the final terms of the deal could change, the people said.
Lower oil prices over the past four years are forcing Gulf lenders to consolidate for scale and to better compete in a crowded market. Subdued credit growth, a squeeze on deposits, higher cost of funds and deteriorating asset qualities are driving consolidation in the regional banking sector.
Three of Abu Dhabi’s state-linked banks are in talks to combine, while Saudi Arabia’s National Commercial Bank and Riyad Bank are exploring a merger.
Kuwait Finance House shares fell 1.1 percent as of 12:25 p.m. in Kuwait City, extending their drop this week to 2.5 percent. Ahli United Bank shares climbed 1.3 percent, adding to a weekly increase of 5.5 percent.
In Bahrain, where the bank is also listed, Ahli United Bank’s stock was up 2 percent.
The boards of Kuwait Finance House and Ahli United Bank are due to meet Thursday to further discuss valuation reports from HSBC Holdings PLC and Credit Suisse Group AG.
Both are advising on the deal.
When asked for comment, Kuwait Finance House said it has already made a disclosure and referred to its statement on Jan 22. Ahli United Bank didn’t immediately respond to requests for comment.
Kuwait Finance House and Ahli United Bank in July said they’d started renewed discussions for a potential merger. Initial talks between the banks faltered over price, people familiar with the matter said last January.