CBO approves merger between National Finance and Oman Orix

Muscat: National Finance Company and Oman Orix Leasing Company have received in-principle approvals from the Central Bank of Oman for their proposed merger.

However, it is subject to approvals from shareholders of both firms and final approval from regulatory authorities, according to disclosure statements posted by both companies on the Muscat Securities Market (MSM) website.

National Finance has offered a cash buyout to shareholders of Oman Orix Leasing Company in May, as part of a merger between the two leading leasing and hire purchase 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. 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 company said in May.

Once the merger is complete, 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 OMR84.13 million.

“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,” Suresh Kumar, head of research at Al Maha Financial Services Company, told the Times of Oman earlier.

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 held OMR191.26 million in net investments in finance activities as of June-end this year, reported a net profit of OMR2.81 million in the first half of 2017, reflecting an increase of 1.01 per cent.

Oman Orix Leasing, which has OMR187.87 million net investments in finance activities, has seen a 15.6 per cent growth in net profit to OMR3 million for the first half of 2017. National Finance had a net worth of OMR44.67 million by June-end, while Oman Orix’s net worth stood at OMR39.46 million for the same six-month period. Oman has six non-banking finance companies, with a wide network of branches spread across the country.

The merger plan follows a study conducted by Deloitte, an independent consultant appointed by both companies for evaluating a possible merger.