National Finance offers 'cash buyout' to Oman Orix shareholders for merger

National Finance Company will offer a cash buyout to shareholders of Oman Orix Leasing Company, as part of the merger between the two leading leasing firms in the Sultanate.

National Finance’s proposed cash offer is equivalent to 1.2 multiples of the book value of Oman Orix at the end of March 2017, which is equivalent to approximately 173 baisas per share. This is against Oman Orix’s latest quoted price of 119 baisas per share on the Muscat bourse. Oman Orix has a net worth or total equity of OMR37.8 million, while its paid-up capital was OMR26.11 million by the end of March 2017. 

“National Finance will be prepared to make price adjustments related to movements in Oman Orix’s financials between the cut-off date and the actual transaction date. In this regard, an offer letter has been sent to Oman Orix for their due consideration,” stated Robert Pancras, chief executive officer of National Finance, in a disclosure letter posted on the MSM website.

However, the proposed cash offer is subject to satisfactory financial and legal due diligence of Oman Orix, approvals from the shareholders of both leasing firms and approvals from regulatory authorities in Oman.

The merger plan follows a study conducted by Deloitte, an independent consultant appointed by both companies for evaluating a possible merger. A joint working group of both companies appointed the consultant to study the merger option in November 2016.

If the merger continues as planned, the merged entity will be the largest leasing and hire purchase company (which is popularly known as a non-banking finance company) in Oman, with a combined net worth of OMR81.14 million and a network of 21 branches.

“It is an indication of consolidation in the leasing industry. Market conditions are a bit challenging, and, as a result, companies are looking for inorganic growth, which is possible only through mergers and acquisitions,” said Suresh Kumar, head of research at Al Maha Financial Services Company.

According to market sources, the merger will help the consolidation, in terms of size and scale, thereby allowing both companies to benefit from economies of scale.

National Finance, which holds OMR190.69 million in net investments in finance activities, has reported a net profit of OMR1.48 million in the first quarter of this year — an increase of 3.28 per cent.

Oman Orix Leasing, which has OMR184.79 million net investments in finance activities, has seen a 2 per cent growth in net profits, at OMR1.34 million for the first quarter of 2017. National Finance has a net worth of OMR43.34 million, while Oman Orix’s net worth by March-end stands at OMR37.8 million. Oman has six non-banking finance companies, with a wide network of branches spread across the country.

Source: Timesofoman