KARACHI, July 15: Altowfeek Investment Bank Limited is all set to merge with First Crescent Modaraba, which would create First Standard Investment Bank Limited.

The giant new investment bank would hold more than Rs2.5 billion in total assets and accommodate directors from both companies on the new Board.

Tariq Aleem, director and company secretary, Altowfeek Investment Bank, confirmed to Dawn from Lahore on Monday that it was indeed a merger between two different groups, with both agreeing to share the control and management of the amalgamated new investment bank.

Prior to the proposed merger, 60 per cent shareholding in Altowfeek was vested in AlBaraka Investment & Development Co, Jeddah, 10 per cent was with NIT and 9 per cent with the Islamic Development Bank, Jeddah. In the proposed amalgamated company (The First Standard Investment Bank Limited), the management company of First Crescent Modaraba — Crescent Business Management (Pvt) Limited, which is a Crescent group unit— would hold 35 per cent shareholding with three nominees on a seven member board of directors. AlBaraka Investment would have 14 per cent stake and a claim to two seats on the board. NIT’s 10 per cent shareholding and one directorship would remain unaltered while the IDB’s stake would reduce to 4 per cent with one nominee on the new investment bank’s board.

Tariq Aleem admitted that the urge to merge had been fuelled in part by the SBP’s minimum capital requirement. According to the quarterly reports ended March 2002, paid-up capital of the two companies would add up to over Rs500 million (Crescent Modaraba: Rs226 million and Altowfeek: Rs310 million), but due to the staggering accumulated losses of Rs275 million on the Altowfeek balance sheet, the net equity of the merged bank would amount to around Rs380 million. Aleem said that the new management would endeavour to bridge this gap to come up to the minimum equity requirement.

In contrast to Altowfeek Investment Bank, First Crescent Modaraba appeared to have a stronger balance sheet with shareholders’ equity of Rs311 million, fortified by some Rs84 million of surplus and reserves. The total assets of the Modaraba stood at book value of Rs1.9 billion at end-March.

Both are publicly traded companies, but their stocks have been posting over 70 per cent discount to the par value. Interesting information for the shareholders would be the swap ratio, which, Aleem said, was being worked out. Shareholders in Altowfeek and Crescent Modaraba would meet at separate extraordinary general meetings on the same day on August 6 at Lahore. Shareholders would be asked “to pass with or without modification the scheme of arrangement for amalgamation.” If members of both companies give their consent, the scheme would then be moved to obtain sanction of the court and a nod from the regulators.