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Deals

Bahrain's Unicorn in merger talks

MANAMA (Reuters) - Bahrain’s Unicorn Investment Bank is in merger talks with several Gulf Arab lenders and plans to sell an Islamic bond worth $425 million by the third quarter to fund its expansion, its chief executive said on Tuesday.

Chief Executive Officer of Unicorn Investment Bank, Majid al-Sayed Bader, speaks during his interview at the Reuters News Summit on Islamic Banking and Finance in the Bahraini capital of Manama April 14, 2009. REUTERS/Hamad I Mohammed

Majid al-Sayed Bader al-Refai also said that the unlisted lender would stick to plans to spend around $2 billion on acquiring banks in the Gulf Arab region, Europe and Asia, trying to benefit from lower prices in the wake of a financial crisis.

“We’ve been approached by a few banks to consolidate with us, and we’re talking,” he told the Reuters Islamic Banking and Finance Summit in Bahrain.

He said the lenders in question were from the Gulf Arab region, but not Bahrain. Asked if they were seeking consolidation due to liquidity problems as a result of the global financial crisis, Refai said: “If you don’t have cash don’t waste your time coming to me. I’m not a wet nurse.”

In addition to the merger talks, the bank was looking to acquire two Gulf Arab lenders, both in retail and investment banking, and would consider acquiring retail banks in Pakistan, India, and Malaysia as well as one in Britain or continental Europe, he said, declining to give a timeframe or name targets.

“We are aggressively looking for potential targets and securing our acquisition financing as we speak,” he said.

In September, Unicorn, which operates in accordance with Islamic law, said it was looking to spend up to $2 billion to buy banks in Europe, southeast Asia and the Gulf.

Unicorn was planning to issue a $425 million sukuk with an ijara-type structure by the third quarter or “hopefully in the second quarter,” Refai said. The group is in talks with two regional banks over arranging the Islamic bond issue, he said.

Plans announced last September to issue $1.5 billion worth of Islamic bonds by the end of 2008 had been postponed due to market conditions, he said.

COPING WITH THE CRISIS

Unlike numerous other Islamic financial institutions, Unicorn does not have substantial investments in real estate, Refai said, making it less vulnerable peers to the impact of a sharp correction seen in the sector in the Gulf Arab region.

Unicorn would “just about break even” in the first quarter, Refai said, adding he would soon announce a revamp to tackle the global financial turmoil, which could include lay-offs and closing operations no longer deemed profitable abroad.

“We will be announcing pretty soon ... a restructuring of the bank to go along with the crisis .... We have to take drastic action early,” he said.

In addition, all new private equity deals in the United States had been shelved, although Unicorn’s existing deals worth between $300 million and $400 million were being continued, Refai said.

But expansion in terms of new licences were still on the horizon, Refai said.

In January 2008, Unicorn received a license to set up a unit in Malaysia after a failed bid for a stake in the country's oldest Islamic lender, Bank Islam Malaysia Bhd BIMB.KL.

Last month, its Malaysian subsidiary Unicorn International Islamic Bank Malaysia said it expected to do $400 million to $500 million of transactions this year, with a strong market projected for medium-sized deals.

Last year, Unicorn acquired family-owned foreign exchange firm Bahrain Financing Co through a $1 billion acquisition fund, aiming to tap into the growing remittance market fueled by the large expatriate workforce in the Gulf Arab region.

Additional reporting by Frederik Richter; Editing by David Holmes

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