Seven financial brokerage companies that are not affiliated to Abu Dhabi or Dubai banks are about to finalise the first-of-its-kind merger in the country.
It is estimated that the merged entity will have a capital of Dh1 billion. An official announcement is expected before the end of the year.
The Securities and Commodities Authority (SCA)?has been encouraging mergers, saying mergers would strengthen market competitiveness and create bigger entities with larger capital.
"It would be better for four or five companies to merge to increase their capital and boost activities instead of their current situation with lower capital," said Ibrahim Al Zaabi, SCA's Deputy CEO for Licencing and Enforcement.
Managing Director of Global Gate Financial Services Adel Al Hosani, who is leading the merger process, told Emirates Business that talks between the seven brokerage companies, six from Abu Dhabi and one from Dubai, are to about to be completed.
"The only solution for brokerage companies to face up to their financial problems is merger. There is no other solution," he said.
Companies should only think about this solution if they are facing huge financial difficulties that could lead to bankruptcy, he said.
"About 80 per cent of companies' capital has been eroded because the expenses are much higher than revenues and it would be impossible to go on in face of the huge financial difficulties they are facing," said Al Hosani.
He said the SCA and Abu Dhabi Securities Exchange insist on taking 50 per cent commission as fees.
Al Hosani wondered why the SCA and ADX continue to ask for 50 per cent commission in these difficult times. "We do not know the reason why the SCA and the exchange take 50 per cent commission, especially when companies are facing difficult financial times. And we do not know what service the Securities and Commodities Authority and the exchange offer in exchange for the big percentage of commission," he added.
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