In what could be the most formidable expansion move, Dubai-based BHM Capital is eyeing the acquisition of AlWaqan Capital Investment LLC. For this takeover, it would seek an extraordinary increase in capital of AED 4.85 billion, or $1.32 billion, to finance the acquisition. This would be the umbrella strategy of BHM Capital to reposition itself in the market and expand its investment portfolio.
PC: ZAWYA
Proposal for Increase in Capital
In its latest disclosure to the Dubai Financial Market, BHM Capital gave details of increasing its capital from AED 173 million to AED 5.023 billion through the issuance of new shares and, similarly, exchange of in-kind shares with the shareholders of AlWaqan Capital. A huge influx of capital will be there to facilitate the acquisition of assets and operations of AlWaqan Capital and their integration into BHM Capital structure.
Details of the Acquisition
Specific details concerning AlWaqan Capital Investment LLC were not disclosed in the announcement, but it definitely is certain that the acquisition will be transformative for BHM Capital. This is a strategic expansion to the other investment and financial services areas that will help BHM Capital probably new areas of services and help it grow its market reach. With insufficient information on AlWaqan Capital’s operations, many aspects of the deal are still speculative, including possible synergies and strategic fit with the two companies.
Shareholder Approval Procedure
To acquire, BHM Capital will have to seek shareholders’ approval. This is not only approval for capital increase but also for the amendments that need to be made in the company’s articles of association concerning this new capital structure. The approval process will involve proper scrutiny on the part of shareholders, who will evaluate the effect of an increase in capital and acquisition on their investments and the company’s future performance.
Amendment to Articles of Association
An increase in capital would mean changes in the articles of association of BHM Capital. Such amendments will spell out clearly the new capital structure, thereby bringing consistency between the company documents that govern its operations and this increased financial position. The suggested amendment is a standard procedure in such transactions to bring legal and operational consistency with the new capital base.
Strategic Implications
Acquisition of AlWaqan Capital is likely to give a new dimension to BHM Capital’s operations. Increase in capital has been predicted to support BHM Capital with a strong capital base, develop its capabilities in the financial services sector, and, importantly, help it gain from new growth opportunities that were opened up by the integrated AlWaqan Capital, which fuelled diversification and created a robust market position.
Conclusion
That BHM Capital will propose increasing its capital to AED 4.85 billion to finance the acquisition of AlWaqan Capital Investment LLC is one of the milestone strategic initiatives. This increase in capital and the subsequent acquisition are sure to have long-term repercussions as far as BHM Capital’s future growth and market positioning are concerned. The stakeholders are going to watch closely how all this unfurls and impacts the wider financial services landscape in Dubai, as the firm looks to secure shareholder approval and amend its articles of association.
