A Russian suitor for Warka?

In March ISX-listed Qimma Financial Investment (VQUF) announced that Warka Bank’s majority shareholder, Saad Al Bunnia, had appointed it to “begin a formal auction process following a due diligence report carried out by Price Waterhouse Coopers.” The announcement, which was posted on Qimma’s website, went on to say that Mr. Bunnia was “interested in entertaining offers” from banking groups “such as Russia’s Alfa Bank or UK-based Standard Chartered.” (Hat tip to “Kickabuck” for sending me this link.)

It’s hard to know what to make of this. For starters, while the one-paragraph announcement is worded like something copied from a news agency, it does not appear to have appeared anywhere else. Oddly, it also does not even explicitly say what Mr. Bunnia is selling, though presumably this would be a majority stake in the bank. And if an auction were being organized, you’d think that Warka itself would have made some official statement to this effect.

The mention of Alfa Bank as a possible buyer gives the story a ring of truth however. It seems a funny thing for someone to make up—why not just claim that Citibank might bid? And it’s also easy to believe that the Russian lender would be interested in an Iraqi acquisition. With cash and book equity both over USD 3 bn at the end of 2010, it shouldn’t be hard for it to take up the unsubscribed shares from Warka’s failed rights issue. (There's more on the rights issue here and here.) Its owners should also have little trouble seeing opportunity in a country that, like Russia in the 1990s, has huge unexploited oil reserves and is in the midst of becoming reintegrated into the global economy.

Another point in favor of the story: Alfa Bank is not without Iraqi connections. It has a close relationship with Russian natural gas giant Gazprom, which leads the consortium that won the Badra oil field concession in 2009. In 2002, the two companies entered into a strategic cooperation agreement including, among other things, “the implementation of joint projects,” “provision of short-term financing to Gazprom,” and “the participation of Alfa Bank in project financing schemes for Gazprom.”

For over a year, rumor had it that Standard Chartered would be taking over Warka. After such a long time, however, you have to wonder if perhaps the British bank isn’t really that interested after all. Could a Russian bank turn out to be a better match?

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