Ahli United Bank stake being sold to investors

Up to five Qatari individuals are aiming to buy a 25per cent stake in Ahli United Bank, Bahrain's biggest lender, with the aim of turning it into a wholly Islamic bank, a source familiar with the matter said.

AUB said last week Kuwaiti investment firm Tamdeen and other unnamed shareholders had agreed to sell the stake in the Bahraini bank to an undisclosed buyer from the Gulf Arab region, in a deal estimated at about $1.3bn.

The lack of details about the deal, particularly there being no name of the buyer, cast doubts on whether it would go through, which weighed on AUB's stock after it initially gained.

"The group is made up of four to five high net worth individuals from Qatar," the source said on Monday. "They are conducting their due diligence and will make a decision in sixty days."

"The buyers plan to convert the bank into a fully Islamic operation," said the source, who declined to be identified.

AUB's Kuwaiti unit is currently being converted into bank compliant with Islamic law, or sharia.

The source said Masraf al-Rayan , Qatar's fourth biggest bank by market value, is advising on the deal.

A Masraf spokesman was not immediately available for comment.

If approved, the deal would make the buyer the single largest shareholder in the bank.

AUB said the shares would be sold at $1.10 each. AUB shares ended up 9.6 percent at $0.74 on the Bahraini bourse on Monday.

Bahrain's central bank said on Sunday it was aware of the sale but did not know the identity of the bidder.

Bankers expect merger-and-acquisition (M&A) activity to pick up again in 2010 in the Gulf Arab region, driven by sovereign wealth funds and as companies restructure in the wake of the global economic crisis.

The number of M&As in region have slowed down as capital has dried up and there has been a valuation gap between sellers and buyers.