Abu Dhabi bank explores US$35b offer for StanChart: sources

FIRST Abu Dhabi Bank (FAB) is pressing ahead with a potential offer for Standard Chartered (StanChart), after a move to put earlier takeover plans on hold did not halt its ambitions to become a global financial powerhouse.

Under the code name Silver-Foxtrot, officials at the Abu Dhabi bank are working under the radar on a possible bid once a cooling-off period required by UK takeover rules elapses, sources said. FAB recently completed due diligence on the London-based lender, the sources said, asking not to be identified because the matter is private. Any deal would be dependent on market conditions and the performance of StanChart’s share price, they said. 

FAB – which is worth about twice as much as StanChart – is exploring an all-cash bid in the range of US$30 billion to US$35 billion, the sources said. Any acquisition would be funded by its backers, which include Abu Dhabi’s sovereign fund Mubadala Investment, and the emirate’s ruling Al Nahyan family, they said. FAB’s chairperson Sheikh Tahnoon bin Zayed Al Nahyan is a powerful royal, and has in recent years taken on a more prominent role to spearhead the emirate’s political and economic goals.

After a period of higher crude prices, Abu Dhabi is keen to use its oil windfall to transform the city’s financial sector, which has lagged many of its other key industries such as energy, tourism and logistics. Such an attempt would represent a step beyond the moves that other wealthy Gulf nations have made to take minority stakes in firms such as Barclays and Credit Suisse. 

FAB last month said that it had explored a bid for StanChart, but that it was no longer considering an offer. The British bank’s relatively small market value – about US$24 billion compared with FAB’s US$43 billion – and the lure of a business with exposure to some of the world’s fastest-growing economies, make it a strong proposition for the Abu Dhabi lender. The drop in the pound also adds to the attractiveness of the British 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 funds on a possible transaction, the sources said. Other bankers working on the plans are frequently shuttling between New York and the UAE capital, one source said. 

Still, getting a deal done would be complicated and ambitious, given the hurdles and the differences in the scale of the two banks. Regulatory approvals and compliance are seen as the biggest obstacles to a successful acquisition, the sources said. FAB would need approval from the US Treasury to run StanChart’s dollar-clearing licence, for example, one source said. 

Under one scenario being considered, StanChart could be delisted from exchanges in Hong Kong and London, and the merged bank’s headquarters could be shifted to Abu Dhabi from the UK capital, the sources said. Such a move is likely to face strong opposition in StanChart’s home market, they added.

FAB’s exploration of such a deal shows the growing ambition of Middle East lenders and the wealthy oil-rich nations that back them. A successful outcome would catapult FAB into becoming an emerging-markets banking giant with more than US$1 trillion in assets – and likely into the club of 30 banks that global regulators consider systemically important. It would also mark a turning point in chief executive officer Hana Al Rostamani’s two-year reign. 

SEE ALSO

Abu Dhabi’s StanChart interest showcases global ambitions

Standard Chartered faces fresh questions after report of Middle East bank’s takeover bid

A representative for FAB referred to its Jan 5 statement which said that it had evaluated a possible offer for StanChart, but was no longer doing so. The representative also said that the bank is bound by takeover rules in the UK and Hong Kong. A representative for StanChart declined to comment. 

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

As well as continuing to pursue either a majority stake or minority holding in StanChart, FAB is also looking at acquiring specific assets from the British lender, or forming a joint venture to help it expand internationally, some of the sources said. FAB is also looking at other banks, including one in Asia, and investment bankers are also pitching a number of possible targets to FAB, other sources said.

There has been open speculation over the future of StanChart for years. Back in 2018, Barclays was reported to be interested in a takeover. In the mid-2000s, there were suggestions that the likes of Citigroup and JPMorgan Chase were interested in buying the bank. Since Bill Winters took the helm, StanChart’s shares have fallen by about a third.

Though StanChart is headquartered in Britain and answers primarily to UK regulators, its fate is likely to 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 individual say in what happens to the bank. Executives in Abu Dhabi have not discussed their plans with the Singapore state investor, sources said. 

Representatives for Mubadala and Temasek declined to comment. A representative for Wall Street’s Moelis did not immediately respond to a request for comment. 

Weeks after FAB confirmed its interest in StanChart, Winters told the World Economic Forum gathering in Davos that it was “quite logical” for Middle Eastern banks to be interested in buying European financial institutions, given their relative valuations, but that he did not think a deal was likely. 

Banks are a “protected species”, making deals difficult, Winters said. “This is not something we’ve either engaged with, or been interested in,” he said. “The thing with StanChart is that we are doing very well all by ourselves. Everything is on track for us.” BLOOMBERG