Potential merger talks have resurfaced for Saudi Arabia’s banking sector, with negotiations involving two banking giants, as the Kingdom’s coronavirus lockdown is lifted and businesses are making a return.
The Saudi National Commercial Bank (NCB) is exploring a deal to acquire Samba Financial Group in what could be the Kingdom’s biggest takeover this year.
Both banks intend to conclude the reciprocal due diligence process and sign the definitive agreements in relation to the merger within a period of four months.
The merged entity would be the third-largest lender in the Arab world with more than $213 billion in assets as of the end of March 2020, about 5 percent higher since the end of 2019. The lenders had a combined 29 percent market share as of the end of last year, based on total deposits held.
The merger would also create an entity with a lending portfolio worth 432 billion riyals, a source familiar with the matter told Reuters.
Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF) is a major investor in both banks, with a stake of 44.29 percent in NCB and 22.91 percent in Samba.
The Public Pension Agency and the General Organization for Social Insurance are also substantial shareholders in both banks.
JPMorgan is advising NCB, while two sources told Reuters Morgan Stanley is advising Samba.
In 2018, Saudi British Bank (SABB) and smaller rival Alawwal Bank agreed to merge in the first major tie-up for the country’s banking sector in recent times.
Predicting that it could be the largest takeover of its kind, economists told Asharq Al-Awsat that the merger will result in the largest commercial bank in the Middle East region. Experts focused on the importance of the merger in supporting the local market.
The shareholders of Samba Financial Group would receive between 0.736 and 0.787 newly issued shares of NCB in exchange for every share they hold in Samba.
Up to 1.54 billion new shares could be issued which, based on the closing price of SR37.25 for each NCB share on June 24, would value the deal at SR57.4 billion ($15.3 billion).
NCB is already the largest bank in Saudi Arabia, with total assets of some $135 billion at the end of last year, and this deal will further entrench its lead. Samba is the fifth largest lender in the country, with assets of some $68 billion.
