First Abu Dhabi Bank PJSC is moving on with a prospective acquisition bid for Standard Chartered PLC after deciding to postpone prior takeover plans.

First Abu Dhabi Bank PJSC is moving on with a prospective acquisition bid for Standard Chartered Plc after deciding to postpone prior takeover plans did not limit its ambitions to become a major player in the world of finance.

According to sources with knowledge of the situation, managers at the Abu Dhabi bank are quietly preparing a potential offer under the code name Silver-Foxtrot for when a cooling-off period mandated by UK takeover regulations expires. They want to remain anonymous since the situation is confidential, but they said that FAB, as the bank is called, just finished its due diligence on the London-based institution. They stated that the success of any purchase would be determined by market conditions and Standard Chartered's share price.

The individuals claimed that FAB, which is valued almost twice as much as Standard Chartered, is considering making an all-cash offer in the $30 billion to $35 billion area. Any acquisition would be paid by its sponsors, which include the Al Nahyan family, who currently hold power in the emirate of Abu Dhabi, and Mubadala Investment Co. Sheikh Tahnoon bin Zayed Al Nahyan, the chairman of FAB, is a strong royal who has recently assumed a more prominent position to lead the emirate's political and economic objectives.

Abu Dhabi is eager to leverage its oil windfall to improve the city's financial sector, which has lagged behind many of its other important businesses including energy, tourism, and logistics during a period of higher crude prices. Such an endeavour would go a step beyond the initiatives taken by other affluent Gulf countries to acquire minority holdings in companies like Barclays and Credit Suisse Group.

Earlier today, in the late morning, shares of Standard Chartered were trading up 9.5% in London.

Big Proposal

Last month, FAB said that although it had looked at making an offer for Standard Chartered, it was no longer considering making one. The Abu Dhabi lender considers the British bank to be a compelling option despite its comparatively low market value—about $24 billion vs FAB's $43 billion—and connections to some of the world's fastest-growing markets. The British pound's decline further increases the appeal of the bank, which is now trading at just 0.56 times its book value.

Given the obstacles and the disparities in the sizes of the two banks, closing a deal will be difficult and ambitious. According to the sources, the major challenges to a successful purchase are thought to be regulatory permissions and compliance. For instance, FAB would want permission from the US Treasury to manage Standard Chartered's dollar clearing licence (as per sources).

In accordance with the sources, one scenario being thought about would see Standard Chartered delisted from exchanges in Hong Kong and London and the combined bank's headquarters relocated from London to Abu Dhabi. They added that such a move would probably encounter fierce opposition in Standard Chartered's home market.

More Credibility

FAB is supposedly considering acquiring particular assets from Standard Chartered or establishing a joint venture with the British lender in addition to continuing to pursue either a majority ownership or minority holding in the British lender. According to other sources, FAB is also considering other banks, including one in Asia, and investment bankers are also presenting FAB with a number of potential targets.

For years, there has been unrestricted discussion about Standard Chartered's destiny. Barclays reportedly expressed interest in a purchase in 2018. There were rumours that major financial institutions including Citigroup and JPMorgan were also considering purchasing the bank in the middle of the 2000s.

(Bloomberg.com, Reuters.com, Financialtimes.co.uk)