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Standard Chartered still in play as Abu Dhabi’s FAB explores $35bn offer

Standard Chartered still in play as Abu Dhabi’s FAB explores bn offer


Most reads come from Bloomberg

First Abu Dhabi Bank PJSC is pushing ahead with a potential takeover bid for Standard Chartered after a move to shelve an earlier takeover plan did not deter its ambitions to become a global financial powerhouse.

Officials at the Abu Dhabi bank, code-named Silver-Foxtrot, are secretly studying a possible takeover once a cooling-off period required by British takeover rules ends, according to people familiar with the matter. FAB Bank recently completed due diligence on the London-based lender, the people said. The person requested anonymity because the matter is private. Any deal would depend on market conditions and the performance of Standard Chartered’s share price, they said.

FAB, which has a market capitalization roughly twice that of Standard Chartered, is exploring an all-cash bid of $30 billion to $35 billion, the people said. Any takeover would be financed by its backers, which include Abu Dhabi sovereign fund Mubadala Investment Co. and the emirate’s ruling Al Nahyan family, they said. FAB chairman Sheikh Tahnoon bin Zayed Al Nahyan, a powerful royal, has played a more active role in leading the emirate’s political and economic goals in recent years. important role.

After a period of rising crude prices, Abu Dhabi is keen to use the oil windfall to revamp the city’s financial sector, which lags behind many other key sectors such as energy, tourism and logistics. Such an attempt would go beyond other wealthy Gulf states taking minority stakes in companies such as Barclays and Credit Suisse.

Shares in Standard Chartered rose 7% at 8:45 a.m. local time in London, after rising as much as 9.6% earlier. FAB traded down 0.6 percent in Abu Dhabi.

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FAB said last month it had explored a bid for Standard Chartered, but it was no longer considering an offer. The British bank’s relatively small market capitalization (around $24 billion compared to FAB’s $43 billion) and exposure to some of the world’s fastest-growing economies made the Abu Dhabi A strong alternative to banks. A weaker pound has also added to the bank’s appeal, with the bank trading at just 0.56 times 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 funds on a possible deal, the people said. Other bankers involved in the scheme frequently commute between New York and the UAE capital, one of the people said.

Still, getting a deal done would be complex and ambitious, given the hurdles and the difference in size between the two banks. Regulatory approval and compliance are seen as the biggest hurdles to a successful acquisition, the people said. For example, FAB needs approval from the U.S. Treasury Department to run Standard Chartered’s U.S. dollar clearing license, a person familiar with the matter said.

In one scenario under consideration, Standard Chartered could be delisted from the Hong Kong and London exchanges and the headquarters of the merged bank could be moved from the British capital to Abu Dhabi, the people said. The move could face a backlash in Standard Chartered’s home market, they said.

The FAB’s exploration of such deals shows the growing ambitions of Middle Eastern banks and the rich oil states that back them. If successful, FAB would catapult itself into an emerging-market banking giant with assets of more than $1 trillion, and potentially join the list of 30 banks globally deemed systemically important by regulators. It also marks a turning point in the two-year tenure of chief executive Hana Al Rostamani.

A representative for FAB referred to its Jan. 5 statement that it had assessed a possible offer from Standard Chartered, but no longer did so, and said the bank was bound by takeover rules in the UK and Hong Kong. A representative for Standard Chartered declined to comment.

“Greater legitimacy”

“The FAB and the royal family are just responding to global financial trends and the inflation of capital in the Middle East,” said Mark Williams, a Boston University professor and former Federal Reserve Bank examiner. “The state’s goal of acquiring a reputable multinational bank is also linked to the desire to gain greater legitimacy in the global financial community while tightening controls over the storage and movement of funds.”

In addition to continuing to seek a majority or minority stake in Standard Chartered, FAB is also considering acquiring specific assets from the British lender or forming a joint venture to help it expand internationally, some of the people said. FAB is also considering other banks, including one in Asia, and investment bankers are pitching FAB with possible targets, others said.

For Standard Chartered, there has been public speculation about its future for years. Back in 2018, there were reports that Barclays was interested in a takeover. In the mid-2000s, there were signs that companies such as Citigroup and JPMorgan Chase were interested in buying the bank. Shares in Standard Chartered have lost about a third of their value since Bill Winters took the helm.

Although Standard Chartered is headquartered in the UK and is primarily accountable to British regulators, its fate may well be decided thousands of miles away in Singapore. For nearly 20 years, Temasek has been the company’s largest shareholder, making it the person with the biggest say in what happens at the bank. Abu Dhabi executives have yet to discuss their plans with the Singaporean wealth fund, according to people familiar with the matter.

Representatives for Mubadala and Temasek declined to comment. Representatives 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 “very logical” for a Middle Eastern bank to be interested in buying a European financial institution, given its relative valuation. , but he did not see a deal as likely.

Banks are a “protected species,” Winters said, making transactions difficult. “It’s not something we’re involved in or interested in,” Winters said. “The thing with Standard Chartered is that we’re doing pretty well ourselves. For us, everything’s on track.”

—with the assistance of Harry Wilson and Shaggy Matthews.

(Updated stock movement in fifth paragraph.)

Most reads come from Bloomberg Businessweek

©2023 Bloomberg Intelligence

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