Islamic banking group, Kuwait Finance House (KFH) has agreed to buy Bahrain-based peer Ahli United Bank (AUB) through a share swap deal.

In a statement, the Kuwaiti lender revealed that it has received a nod from the Central Bank of Kuwait to acquire 100% share capital of AUB.

As per Bloomberg’s report, the deal is valued at around $11.6bn based on the revised terms, under which KFH will offer one share for every 2.695 shares of AUB.

The talks for the acquisition first began in 2019 but Kuwait’s central bank asked KFH to reassess the deal in 2020 as the Covid-19 pandemic spread.

At the time, the deal was valued at around $8.8bn, with KFH issuing one share against 2.325 shares of the Bahraini lender.

Since then, shares of KFH have soared 66% valuing the bank at $25.8bn and AUB shares are up 27% giving it a market value of $10.3bn.

The merger is anticipated to create the seventh-largest bank in the Gulf region, with $115bn in assets.

AUB’s board has agreed to accept the revised terms of the share swap.

“The acceptance of the above-mentioned share exchange ratio does not imply that an official acquisition offer has been made by KFH,” the bank said in a statement.

The merger will help optimise cost, provide geographic diversification as well as higher participation in state projects to KFH, the publication said citing an industry specialist.