StanChart still in play as Abu Dhabi FAB reviews $35 billion bid

(Bloomberg) —

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First Abu Dhabi Bank PJSC is moving ahead with a potential bid for Standard Chartered Plc after an attempt to suspend previous takeover plans failed to end its ambitions to become a global financial powerhouse.

Codenamed Silver-Foxtrot, Abu Dhabi bank officials are working under the radar on a possible offer after the cooling-off period required by UK takeover rules has passed, according to people familiar with the matter. FAB, as the bank is known, recently carried out due diligence on the London-based lender, the people said, asking not to be identified as the matter is private. Any deal would depend on market conditions and the performance of Standard Chartered’s share price, they said.

FAB – which is worth about twice Standard Chartered – is considering a cash offer of $30 billion to $35 billion, the people said. Any acquisition would be funded by its backers, which include Abu Dhabi’s sovereign wealth fund Mubadala Investment Co. and the emirate’s ruling Al Nahyan family, they said. FAB Chairman Sheikh Tahnoon bin Zayed Al Nahyan is a mighty king and has in recent years taken on a greater role in achieving the emirate’s political and economic goals.

After a period of rising crude oil prices, Abu Dhabi is keen to use its oil profits to transform the city’s financial sector, which lags behind many of its other key industries such as energy, tourism and logistics. Such an attempt would go further than moves by other wealthy Gulf countries to take minority stakes in companies like Barclays Plc and Credit Suisse Group AG.

strong offer

The FAB said last month it had considered a bid for Standard Chartered but was no longer considering a bid. The UK bank’s relatively small market value – around $24 billion compared to FOB’s $43 billion – and the appeal of a business with exposure to some of the world’s fastest growing economies make it a compelling proposition. solid for the Abu Dhabi lender. The fall in the pound also adds to the attractiveness of the bank, which trades at just 0.56 times its book value.

Wall Street veteran Ken Moelis is working closely with FAB executives, key members of Abu Dhabi’s ruling family and some of the emirate’s sovereign wealth funds on a potential deal, the people said. Other bankers working on the plans commute frequently between New York and the capital of the United Arab Emirates, one of the people said.

Nevertheless, finalizing a deal would be complicated and ambitious given the hurdles and size differences between the two banks. Regulatory approvals and compliance are seen as the biggest hurdles to a successful acquisition, the people said. For example, FAB would need US Treasury Department approval to operate Standard Chartered’s dollar clearing license, one of the people said.

Under one scenario being considered, Standard Chartered could be delisted from the Hong Kong and London stock exchanges and the merged bank’s headquarters could be moved from the British capital to Abu Dhabi, the sources said. Such a move is likely to be met with strong resistance in Standard Chartered’s home market, they said.

FAB’s exploration of such a deal shows the growing ambitions of Middle Eastern lenders and the rich oil-rich countries that support them. Success would propel FAB into an emerging markets banking giant with assets of over $1 trillion – and likely into the club of 30 banks deemed systemically important by global regulators. It would also mark a turning point in Chief Executive Hana Al Rostamani’s two-year tenure.

Referring to its January 5 statement that it had considered a possible bid for Standard Chartered but was no longer doing so, an FAB representative said the bank was bound by takeover rules in the UK and Hong Kong. A representative for Standard Chartered declined to comment.

“More legitimacy”

“FAB and the Royal Family are simply reacting to global financial trends and increasing amounts of capital in the Middle East,” said Mark Williams, a Boston University professor and former Federal Reserve Bank auditor. “Along with the state’s goal of acquiring a respected multinational bank comes a desire to gain greater legitimacy in global financial circles while strengthening control over the storage and movement of funds.”

Not only does FAB continue to seek a majority or minority stake in Standard Chartered, but it is also considering acquiring some of the UK lender’s assets or forming a joint venture to help it expand internationally, some people have said. FAB is also looking at other banks, including one in Asia, and investment bankers are also presenting FAB with a number of possible targets, others said.

Standard Chartered has been openly speculating about its future for years. Barclays Plc was reportedly interested in a takeover as early as 2018. In the mid-2000s, it was suggested that companies like Citigroup Inc. and JPMorgan Chase & Co. were interested in buying the bank. Since Bill Winters took the helm, shares of Standard Chartered have fallen by about a third.

Although Standard Chartered is headquartered in the UK and reports primarily to UK regulators, its fate will likely be decided thousands of miles away in Singapore. Temasek Holdings has been the company’s largest shareholder for nearly two decades, giving it the biggest say in what happens to the bank. Abu Dhabi leaders have not discussed their plans with Singapore’s wealth fund, according to people familiar with the matter.

Mubadala and Temasek officials declined to comment. A representative for Moelis did not immediately respond to a request for comment.

Weeks after FAB confirmed its interest in Standard Chartered, Winters told the World Economic Forum in Davos that it was “quite logical” that Middle Eastern banks would be interested in buying European financial institutions. given their relative valuations. thought a deal was likely.

Banks are a “protected species” that make business difficult, Winters said. “We didn’t watch that, and we weren’t interested in that,” Winters said. “The thing with Standard Chartered is that we do very well on our own. Everything is in progress with us.

–With the support of Dinesh Nair, Jan-Henrik Förster and Harry Wilson.

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