Dubai: The Government of Dubai on Sunday cleared the acquisition of a controlling stake in Islamic mortgage company Tamweel by Dubai Islamic Bank (DIB).
Through this move, DIB will hold a 57.33 per cent stake in Tamweel, making it the largest single shareholder in the company.
"This strategic move is the culmination of intensive efforts over the past few months to resolve the stalemate at Tamweel that will allow the company to resume its core activity of providing mortgages and real estate financing," the Government of Dubai's Media Office said in a statement.
Resolution
Earlier, a resolution was passed by the Cabinet headed by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of UAE and Ruler of Dubai, to form a committee chaired by Sultan Bin Saeed Al Mansouri, Minister of Economy, to examine and assess a number of public joint stock companies including Tamweel.
Following this, an exec-utive committee was put together to oversee work and to monitor progress at Tamweel.
Under the new plan, DIB, which owned a strategic stake of nearly 21 per cent in Tamweel, increased its stake by acquiring an additional 20 per cent from Dubai World's investment arm Istithmar and the remaining (about 17 per cent) shares from Dubai Holding and its group companies, said sources close to the deal.
Announcing the details of the deal on Sunday, DIB CEO Abdullah Ali Al Hameli said following this acquisition DIB will pump fresh funds into Tamweel to revive its business.
"Our objective through this deal is to get the business going in Tamweel and we will do whatever it takes to achieve it," said Al Hameli.
The combined mortgage portfolio of DIB and Tamweel together is expected to exceed 30 per cent of the total mortgage market. However, despite the gain in the market share, analysts said the acquisition would weaken DIB's balance sheet.
Tamweel expects to resume providing mortgage financing in three to four weeks. "As far as Tamweel and DIB are concerned, the deal has been finalised. We need to get a few regulatory clearances, but we expect to be back in business within a few weeks," Wasim Saifi, Tamweel Chief Executive Officer, said.
DIB did not reveal the price it paid to strategic shareholders to acquire additional shares in Tamweel.
Amlak deal scrapped
The future of the minority shareholders in Tamweel remains uncertain despite the acquisition of the majority stake in the company by Dubai Islamic Bank.
DIB officials said on Sunday that Tamweel shares will remain suspended from trading for a few months. However, they did not give any clear indication if the minority shareholders will be given an open offer to exit.
Following an announcement in October 2008 that Tamweel and Amlak, another DFM listed mortgage finance company, would be merged, both stocks have been suspended from trading.
Officials have confirmed that the merger plans with Amlak have been put off and any restructuring plan for Amlak will be independent from the deal between Tamweel and DIB.
