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|16 May, 2019

Shuaa Capital reaches "final stages" in ADFG merger talks, records Q1 loss

The Company is going through final stages before regulatory and shareholder approvals will be sought, Shuaa said in a press release

An investor uses his mobile phone at the Dubai Financial Market November 30, 2009. REUTERS/Ahmed Jadallah

An investor uses his mobile phone at the Dubai Financial Market November 30, 2009. REUTERS/Ahmed Jadallah

REUTERS/Ahmed Jadallah

Shuaa Capital announced late on Wednesday a net loss for the first quarter (Q1) of 2019 and said that it is progressing with its potential merger with Abu Dhabi Financial Group (ADFG).

The company’s Q1 2019 net loss attributable to the company’s shareholders amounted to 24.9 million UAE dirhams ($6.78 million), compared to a net profit of 11.69 million dirhams in Q1 2018.

The company’s revenue rose 67 percent to 55.4 million dirhams in Q1 2019, from 33.16 million dirhams in Q1 2018.

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“The increase in revenues is definitely a breath of fresh air especially with a clear jump in fees and commission income; however the increase in G&A was able to offset that gain to result in an overall loss, unfortunately,” Issam Kassabieh, senior financial analyst at Menacorp Financial Services, told Zawya by email.

General and administrative expenses increased by 81 percent to 50.22 million dirhams in Q1 2019, compared to 27.67 million dirhams in Q1 2018. Fees and commission income almost trebled to 33.67 million dirhams in Q1 2019, compared to 12.11 million dirhams in Q1 2018.

In a press release, Shuaa confirmed that it “is progressing with its potential transaction with ADFG through a strategic investment structure wherein the combined entity will continue to operate as a publicly listed company.”

“The company is going through final stages before regulatory and shareholder approvals will be sought,” the press release added on Wednesday.

In March 2019, Shuaa announced it had started talks with ADFG on a possible merger. Reuters had reported in April that ADFG is set to take over Shuaa in a reverse merger, citing sources familiar with the matter. (Read more here).

ADFG already owns 48.36 percent of Shuaa, according to data from Eikon. A reverse merger is the acquisition of a public company by a private company and is seen as an easy way to take a private firm public.

“The merger with ADFG is a strong highlight for the firm (Shuaa) and will ramp up its operations in terms of access and strengthen its reputation as ADFG manages more than USD20bn in assets and has a variety of investments under its portfolio,” Kassabieh added.

“The merger could also be looked at as a means for ADFG to enter the market without going through an IPO which could be ideal at this stage,” Kassabieh said.

Shuaa’s shares were trading 3.2 percent higher on Thursday at 0.87 dirhams by 11:08 GST and have added 2.8 percent so far since the start of the year 2019.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

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© ZAWYA 2019

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