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Middle East: Gulf moves from buyouts to mergers

NBAD’s merger with FGB gives Abu Dhabi a bank with a similar market cap to firms such as DBS and Standard Chartered. At the same time, the emirate is merging two of the Gulf’s most powerful state investment companies, Ipic and Mubadala. Amid low oil prices, Gulf states are finding new strategies for national champions.

NBAD head office-213

NBAD head office, Abu Dhabi

The world’s biggest bank M&A deal so far in 2016 could suggest a new push for consolidation by the sheikhs and government advisers who mastermind the Gulf’s corporate sector. 

Ten days after announcing the combination of National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB), Abu Dhabi said its two private equity-style state investment funds, Mubadala Development Co and the International Petroleum Investment Co (Ipic) would also merge. The proximity of the two deals only heightened expectations that persistently low oil prices might finally bring more domestic M&A in the UAE and beyond. 

The NBAD/FGB combination will create the Middle East’s biggest bank by assets and its second-biggest bank by market capitalization after Qatar National Bank (QNB). Meanwhile, the merger of Mubadala and Ipic fuses funds with assets of $67 billion and $58 billion, respectively. Ipic, in particular, made a name after 2008 for its bank investments, previously including Barclays. Ipic’s Aabar subsidiary remains the second-biggest shareholder in Malaysia’s RHB Capital and UniCredit (whose plummeting value as Italy’s biggest bank might tell of wider strains).

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