National Finance to raise OMR46m to fund ‘cash buyout’ of Oman Orix

Muscat: National Finance Company plans to raise OMR45.8 million by way of a rights issue and a perpetual bond issue to raise fund for its ‘cash buyout’ of the Oman Orix Leasing Company.

The Board of Directors, which has approved the OMR27.6 million rights issue and another OMR18.2 million perpetual bond issue as private placement, has decided to convene an extraordinary general meeting to seek approval for the same from shareholders, according to a disclosure statement posted on the Muscat Securities Market’s website.

The shareholders at its forthcoming extra ordinary general meeting will also consider the merger of two leading leasing firms by way of a cash offer to the shareholders of Oman Orix Leasing Company.

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 160 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 at the end of March this year. The proposed cash offer is subject to approvals from regulatory authorities in Oman.

Proposed rights issue

The proposed rights issue of OMR27.6 million will be carried out by offering 217.60 million shares to the existing shareholders at a price of 127 baisas per share, which include 2 baisas per share as issue expenses.

National Finance is also seeking shareholders’ approval for raising its authorised capital to OMR75 million from OMR30 million.

If the merger continues as planned, the merged entity will be the largest leasing and leasing 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.

A market source has said earlier that the market conditions are a bit challenging, and, as a result, companies are looking for inorganic growth, which is possible only through mergers and acquisitions.

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, reflecting an increase of 3.28 per cent. National Finance has a net worth of OMR43.34 million, while Oman Orix’s net worth by March-end stood at OMR37.8 million.

Oman Orix Leasing, which has OMR184.79 million in net investments in finance activities, saw a 2 per cent growth in net profits to OMR1.34 million for the first quarter of 2017. Oman has six non-banking finance companies, with a wide network of branches spread across the country.