NCB-Samba Merger; Will create 3rd largest lender in the Gulf Region

A binding merger agreement with smaller lender Samba Financial Group has been agreed by Saudi Arabia’s largest lender National Commercial Bank (NCB) to create a consolidated company with assets worth $223 billion (837 billion riyals), according to NCB.

Once completed, after Qatar National Bank (QNB) and the First Abu Dhabi Bank of the UAE, the NCB-Samba tie-up will create the Gulf region’s third-largest lender by assets.

In a bourse filing, NCB reported that it has agreed to pay $7.58 (28.45 riyals) for each Samba share, valuing it at around $14.85 billion (55.7 billion riyals). That corresponds to a 3.5 percent premium on Oct. 8, the last business day, to Samba’s closing share price.

In its effort to diversify its oil-dependent economy, Saudi Arabia has encouraged consolidation in the banking sector as it seeks to build stronger institutions able to sustain the role that the private sector can play.

NCB said, “The merged bank will become the largest bank in the Kingdom and a leading bank in the Middle East region with 171 billion riyals in market capitalization”.

The Public Investment Fund (PIF), the sovereign wealth fund of Saudi Arabia, is a major investor in both banks, with a 44.29 percent stake in NCB and 22.91 percent in Samba.

PIF would retain a 37.2 percent stake in the new company after the merger, while the Saudi Public Pension Agency with a 7.4 percent stake and the General Association for Social Insurance (GOSI) with a 5.8 percent stake will be other major shareholders in the combined bank.

Samba shareholders will receive 0.739 new NCB shares for every existing share of Samba upon completion of the merger, NCB said.

The initial agreement was set up in June with the motive to initiate the reciprocal due diligence process and to negotiate the terms of the agreement.

The chairman of Samba, Ammar Alkhudairy, will be the chairman of the combined company, while Saeed al-Ghamdi, the current chairman of NCB, will be the managing director and chief executive officer.

Both the investment arms of the current banks, NCB Capital and Samba Capital, will own the new company. The merger is not supposed to result in workers becoming involuntarily redundant, NCB said.