FIMBank to acquire top London forfaiting company

First International Merchant Bank (FIMBank) moved into the premier league of world trade finance yesterday after the board of London Forfaiting Company (LFC) agreed on a £31 million takeover bid by the Malta-based bank.

LFC is a world leader in the forfaiting market, with offices in key cities, and its shares trade on the London Stock Exchange.

The deal, for the entire issued share capital of LFC, is worth 29.5 pence a share, a 119 per cent premium to London Forfaiting's price last September before it put itself up for sale.

"The acquisition of London Forfaiting will enable us to accelerate the growth of our forfaiting business," said Najeeb Al-Saleh, chairman of FIMBank in a statement from London after statements were issued simultaneously by the London and the Malta stock exchanges to announce the deal.

Bank president Claude L. Roy and director Francis J. Vassallo described the deal as a "historic moment" for FIMBank and for Maltese banking history.

Mr Vassallo said the deal was subject to acceptance by 90 per cent of LFC's shareholders and approval by the Malta Financial Services Authority. Some 60 per cent of LFC's shareholders have already accepted the Maltese bid, and the takeover is expected to be formally completed by the end of September.

LFC will continue to offer forfaiting services under its world-renowned brand name through its global network as a forfaiting/trading arm of FIMBank.

"The acquisition is being made to benefit from the LFC's brand name, network and experience in this specialty field. Forfaiting has always been a product of FIMBank and this acquisition will enable the bank to accelerate its growth," Mr Roy said.

FIMBank was registered in Malta in 1994 and has a mostly Kuwaiti shareholding, with some 14 per cent of the shares held by Maltese investors. It is already a leader in the world's ship-scrapping market, having financed 40 per cent of the market last year.

London Forfaiting was established in 1984 to specialise in the arrangement and provision of forfaiting and other trade related finance products. It has financed trade flows worth billions of dollars between 60 countries world-wide and has offices in London, New York, Moscow, Cyprus, Turkey, Sao Paolo and Paris.

Mr Vassallo explained that the acquisition, which will be in cash, will be financed by a short term bridging loan from Bank of America and FIMBank's own resources. Following completion of the deal, FIMBank intends to use the cash resources of LFC to repay the bridging loan.

LFC decided on the sale after trading and funding possibilities became more difficult for an independent forfaiting company with the onset of the emerging markets crises in 1997, circumstances which had led to the company's share price regularly trading at a large discount to its net asset value. The company board announced in September 2002 that it believed London Forfaiting should find a suitable banking or international finance partner which could provide funding support for growth of its business, and indicative offers were invited. But none had been accepted before FIMBank's offer.

Mr Vassallo thanked financial advisers KPMG, WestLB and Dawnay, Day for their assistance in the deal and particularly Margrith Lutschg-Emmenegger, former managing director and global head of forfaiting at WestLB who earlier this year became executive vice-president of FIMBank.

FIMBank will be holding an information meeting for its shareholders at the Malta Stock Exchange on Monday.