(A correction was made to Faisal Sarkhou's designation in the first and second paragraphs)

The CEO of Kuwait’s KAMCO Investment Company has said that his firm has "now taken a major step towards our aim of becoming the top investment firm in the region" following the completion two weeks ago of its purchase of a near-70 percent share in local competitor Global Investment House.

KAMCO CEO, Faisal Sarkhou, who has also just become chairman of Global Investment House (Global), said in an emailed response to a set of questions submitted by Zawya:  "This deal... draws us closer towards our vision of becoming the leading asset management and investment banking player in the local and regional market."

KAMCO first announced a plan to take a majority position in Global in May this year, when it said it signed a sale and purchase agreement with NCH Ventures - a Bahrain-based entity representing the interest of more than 50 financial institutions - to buy over 396.4 million shares, or 69.528 percent of Global. The company hired professional services firm Alvarez & Marsal in June to advise on the deal.

"The next step will include a collaborative approach towards identifying and leveraging the key strengths within each firm,” Sarkhou said.

He added that the firm would look to "better integrate our businesses in terms of product offerings, technology ecosystems, and geographical reach" in a response to a question on planned synergies from the deal, but the company did not respond to specific follow-up questions regarding its headcount plans.

“Within the next period, there will be more developments and actions taken that are built into our long-term strategic plan,” Sarkhou said in the email.

For KAMCO, the deal offers the potential to expand beyond its current markets in Kuwait and the United Arab Emirates via Global’s network.

"When deciding to purchase the majority stake in Global, we assessed the benefits of gaining access to their international presence in the UAE, Saudi Arabia, Bahrain, Egypt, Jordan and Turkey.

"Through Global’s established presence in these areas, we can further expand both firms' exposure and offering throughout the MENA region."

He said the deal also gives it a share of around 21 percent of the local market, in terms of assets under management, with KAMCO holding a 16.1 percent market share, or 3.37 billion Kuwaiti dinars ($11.1 billion) of assets under management at the end of last year, while Global had 4.9 percent, or 900 million dinars of assets under management.

"By increasing our operational size and scale, we will have access to more resources that will assist us when working with individuals, corporates and governmental institutions," Sarkhou said. "KAMCO itself has been awarded a key role in providing its advisory services for the privatisation of Boursa Kuwait, and we are seeking further roles in public sector and privatisation transactions in the future," he added.

A Global crisis

Global has faced tough times since the firm was caught out by the global financial crisis, when it used lots of short-term loans to fund purchases of real estate stocks, which then tumbled in value.

It underwent two restructurings, with the second completing in 2013 when parts of the business were spun out into special purpose vehicles containing company assets and debt, and the remaining core unit generating fee income, according to Reuters.

Even after this, the company's website shows that revenue, total assets and profits have been declining over the past three years - profit more than halved to 2.29 million dinars between 2014-17, while revenue fell by 37 percent to $14.1 million over the same period. Sarkhou said: "Global's business has stabilised during the last years after successful restructuring efforts."

He also pointed to its Q2 quarterly results ending June 30, which showed that total income edged up by 5 percent in the quarter to 3.5 million dinars, and profit to equity holders more than doubled year-on-year to 1.4 million dinars.

"In addition to that, with its geographical presence and a shared common value, we believe that this transaction fits well with KAMCO’s strategy to strengthen our expertise within our field and will add to our overall market reach in the region," Sarkhou said.

KAMCO was set up in 1988 as a division of Kuwait’s United Gulf Bank, which retains a 77.83 percent share in the company, according to the former’s website. It earned fee income of 2.2 million dinars in the three months to June 30 – up 25 percent year-on-year.

A report published by Kuwait Finance House, Markaz, last week said that Kuwait's stock market enjoyed a liquidity spike on September 20 as the first phase of the market's inclusion into FTSE Russell's benchmark emerging market index began.

"However, (the) Kuwait stock market was flat during the month and is just about holding on to its yearly gain of 8.8 percent," the report said.

(Reporting by Michael Fahy; Editing by Shane McGinley)
(michael.fahy@refinitiv.com)

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