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Dubai Islamic Bank pays Dh374.7m to Tamweel
DUBAI - Dubai Islamic Bank PJSC paid Dh374.7 million ($102 million) to buy a controlling stake in Tamweel PJSC as the United Arab Emirates' biggest Islamic lender sought to boost mortgage financing in Dubai.
- PUBLISHED: Mon 4 Apr 2011, 11:11 PM UPDATED: Wed 21 Aug 2024, 2:52 PM
Dubai Islamic Bank paid Dh318.6 million in cash and Dh56.1 million in treasury shares for the stake, according to the bank's annual report distributed on March 31. The lender in September raised its share in Tamweel to 58.3 per cent from 21 per cent, without disclosing the value of the transaction.
The deal implies a payment of Dh1 for each Tamweel share, according to Bloomberg calculations. Tamweel's shares last traded at Dh0.99 on November 20, 2008, when they were suspended pending a reorganisation. They had a book value of Dh2.23 at the end of December, Tamweel's results show.
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“I was anticipating a payment of Dh0.7 a share, so the acquisition is certainly more expensive than I had expected,” Raj Madha, a Dubai-based analyst at Rasmala Investment Bank Ltd, said in a phone interview on Sunday. “What is more interesting about the transaction though is the funding guarantees that Tamweel received, which will help its longevity.”
Tamweel and Amlak Finance PJSC, another Dubai-based Islamic mortgage company, halted lending after the global credit crisis blocked their access to funds. The UAE federal government set up a committee in 2008 to study the revival of the two companies, which had relied on market borrowings to fund their mortgages. Tamweel began lending again from November 1.
Dubai Islamic Bank also revalued each Tamweel share to Dh2.7 after a valuation of the company, according to the report. As a result, the bank booked a fair value gain of Dh637 million from the acquisition in 2010.
“The gain has no real impact on my valuation; it doesn't add to Dubai Islamic Bank's cash flows, doesn't affect its ability to pay dividend and doesn't add to regulatory capital,” Madha said.
Shares of Dubai Islamic Bank, in which the Dubai government holds a 30 per cent stake, gained 1.4 per cent to Dh2.25 at 1:33pm in Dubai on Sunday. The stock has gained 3.2 per cent this year compared with a 4.5 per cent decline in the benchmark Dubai Financial Market General Index.