The merger of Ominvest and ONIC Holding has created the largest publicly traded investment company in Oman. AbdulAziz Al Balushi, CEO, Ominvest shares details about the idea, process, advantages and future of the merged entity in his first media interview after the formalisation of the merger. Mayank Singh reports.
Now that the merger is complete, how do you look at the whole merger experience?
First of all, we profoundly thank our shareholders and the regulators for their trust, support and confidence and guiding us to successfully accomplish this historic merger deal between ONIC and Ominvest.
The merger would not have happened without the great vision and guidance of the chairmen of both the companies and the boards of directors. In addition, the management teams of both the companies worked together effectively to realise the vision of their leaders for a successful merger.
I am pleased to tell you that at Ominvest’s extraordinary general meeting (EGM) for the merger, we had an attendance of 92 per cent and the merger proposal was approved unanimously. Similarly, ONIC at its EGM had an 83 per cent attendance and the merger proposal was also approved unanimously. This reflects immense confidence and trust by the shareholders of both the companies.
Importantly – one of the key tenets of the merger has been to formulate a much bigger and better entity to serve as a catalyst for the economic development of the Sultanate and create opportunities for Omani nationals in various sectors.
In a word, our experience with this merger has been ‘phenomenal’ and I believe that’s the feeling of a vast majority of all the stakeholders.
When was the merger process initiated and as of today where does it stand?
The process started a few months after I joined Ominvest in February 2014. Our chairman and the board were exploring ways to grow Ominvest – both organically and inorganically. Similarly, the chairman of ONIC shared the same vision for ONIC and had great thoughts about working collaboratively. It started with a very friendly conversation between the two institutions on how we all could work together and create significant synergies for our shareholders.
The merger was completed on August 19, 2015 and ONIC shareholders became shareholders of Ominvest. All the assets and liabilities of ONIC have been consolidated into Ominvest financials and the combined entity has already taken its new form. All the policies and procedures, systems and resources have been efficiently integrated and finalised. All legal and regulatory issues have been duly completed.
Now, we are working on our future growth plans and implementing our business strategy under the guidance and support of our esteemed board of directors.
Ominvest and ONIC have investments in a number of blue chip companies like Oman Arab Bank, National Life, National Finance, Al Ahli Bank, Al Ahlia Insurance and Oman Orix Leasing. Is it going to be business as usual for these companies or will things change as a result of the merger?
This is a great question! Our investment philosophy includes investing in great brands and blue chip companies run by smart management teams. Therefore, we don’t interfere with their business and operational strategies. In fact, we stand ready to assist them wherever they require us to help achieve growth targets. We have capable leaders and managers running these businesses and we are their true partners in our shared journey to growth and success.
Going by initial trends, the merger has been received well by the shareholders of the two companies. Do you think this is just the initial euphoria, or are there definite advantages that the merger will bring in its trail?
It’s a well thought-out merger, entailing significant and sustainable value creation for all the shareholders of the combined entity. Since we started the merger negotiations with ONIC in early 2014, the key shareholders of both Ominvest and ONIC have been very supportive and consistently positive about the merger. Similarly, the market has also appreciated the merger rationale and the potential value creation.
There are definite advantages of the merger – some of the key benefits include: stronger and diversified shareholding base, diversified interests in financial services and other growth sectors; economies of scale, leading to lower operational costs; revenue synergies by collaboration between our subsidiaries and associates; enhanced quality of earnings; much stronger and diversified balance sheet; Larger and stronger management teams; bigger market capitalisation, bigger stock float, and increased liquidity.
Since the merger, the combined entity is much stronger financially and we have already replaced some of our high interest loans with low interest loans at very favourable terms. At Ominvest, we are not engaged in speculative stock market trading. Instead, we have put in place a steady and reliable stream of dividends and income from our subsidiaries and associate companies. The idea is not to rely on the ups and downs of stock market swings-related market earnings, but to create sustainable streams of income by owning good quality businesses. This helps increase the quality of our earnings, builds investor confidence and creates durable shareholder value.
Can you share the details of the stock swap for shareholders of Ominvest and ONIC Holding?
It was an all-stock merger. The share swap ratio of 67:33 was agreed and approved by the shareholders of the two companies. This meant that old shareholders of Ominvest would own 67 per cent of the combined entity and ONIC shareholders would own 33 per cent of the combined entity. In line with the swap ratio, Ominvest issued 182.4 million shares to ONIC shareholders, and as a result, now Ominvest’s total outstanding shares have increased to 552.9 million shares. The swap ratio and the valuation work for the merger was handled by the reputed international consulting firm Boston Consultancy Group (BCG), who acted as an independent external consultant jointly appointed by both Ominvest and ONIC. Later, both Ominvest and ONIC went through detailed negotiations and agreed on the merger deal, resulting in a win-win for the shareholders of both the institutions.
What will be the size and profile of the combined entity?
Ominvest has grown significantly over the last one year and this is attributable to both organic growth and also to our merger with ONIC. Today, Ominvest is the largest publicly-traded investment company in Oman. Ominvest’s business profile has also strengthened significantly. Now, we have large and highly profitable subsidiaries in the banking and insurance sectors and a number of associate companies in the leasing and other growth sectors in Oman as well as in the rest of the GCC. This has led to a robust balance sheet and more diversified revenue and profit base. In summary, the new Ominvest is well-positioned to significantly enhance value for all our stakeholders, in the long term.
Whenever an M&A happens, there is a fear that the culture of the bigger entity prevails; how are you ensuring that something similar does not happen in this case?
Teams at Ominvest and ONIC already shared the core values of teamwork, integrity, performance, delegation and accountability. Therefore, the transition and integration has been very smooth. The cultures of Ominvest and ONIC were shaped and inspired by their chairmen and the boards and therefore ONIC team has seamlessly become part of Ominvest family. We are working very well as one team.
How will the merger pan out on the operational side – i.e. will all the staff members be absorbed/ retained or will there be layoffs? What will be the name of the new entity? How long will the merger take on the administrative side?
I am pleased to tell you that all ONIC staff has been retained after the merger and we have already embedded them very well within Ominvest. The entire ONIC staff is passionate and very motivated to have joined Ominvest. In fact, we have hired more Omani professionals to help us achieve our future growth targets. Name of the new entity remains Ominvest. All the financial, business and operational issues have already been completed, while some of the procedural and administrative matters are being closed in the due course. Our entire focus has now shifted to implementing our future growth strategy.
The merger is one of the biggest M&As that have taken place in the Sultanate. Does this set a precedent for more M&As in Oman?
The market and all the stakeholders have very well received our merger. We do expect more M&A to take place, as it would lead to bigger and more profitable companies across key sectors in Oman. In my view, consolidation is important, needed and it will be good for Oman’s economy.
What does new Ominvest mean for Oman’s economy?
The combined entity is much larger, more efficient and in a much better position to create jobs for Omani nationals, help grow Omani businesses and be a strong catalyst for economic growth in Oman.