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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of US dollars)
14. Investments in
associates
(continued)
Ithmaar Bank B.S.C.
On 31 March 2010, DMI acquired an additional 400 million shares of Ithmaar
Bank B.S.C. by participation in a rights issue at a price of $0.25 per share for
a total consideration of $100 million. As a result of this transaction, DMI owns
52.6% of the outstanding shares of Ithmaar Bank B.S.C. converting it from an
associate to a subsidiary (note 42), which has resulted in the full consolidation
of Ithmaar’s income statement and balance sheet at 31 December 2010.
The step acquisition from the associated company to the subsidiary company
resulted in a net gain of $334.9 million, which is included in the consolidated
statement of income. This amount comprised a mark up to fair value of the
associated company shareholding of 44.9%. In assessing the above gain, DMI
has relied upon an independent valuation commissioned from an international
firm of chartered accountants who established a value using various valuation
methodologies comprising the average of a peer group market analysis of
banks listed on the Bahrain Bourse and a discounted cash flow adjusted for an
estimated control premium but which did not include a reference to the market
price of Ithmaar Bank’s shares at the relevant time. Both the independent valuer
and DMI believe that the share price quoted on the Bahrain Bourse does not
reflect the fair value of the business and they also do not consider that the
historical turnover of the shares constitutes an active market. As a result, the
share price was disregarded in the valuation. In addition, DMI’s share of Ithmaar
Bank B.S.C. reserves held in equity were recycled as follows:
At 31 March 2010
44.9% carrying value
211,976
44.9% fair value
587,125
Mark up to fair value
375,149
Reserves held in equity:
Investment security revaluation reserve
(14,892)
General reserve
973
Foreign exchange
(26,345)
Net gain on step acquisition
334,886
55
Dar Al-Maal Al-Islami Trust
Annual Report 2011