Two of the largest banks in Saudi Arabia, The National Commercial Bank (NCB) and Samba Financial Group have entered into an initial agreement to achieve what could be the biggest takeover in the banking sector of Saudi Arabia this year.
The transaction is worth up to $15.3 billion and the combined entity is estimated to have assets worth $214 million.
Both the banks had announced to the Saudi Stock Exchange (Tadawul) that they had entered into a framework agreement on 25th June to “initiate the reciprocal due diligence process and to negotiate the terms of the agreement” and are expecting that the deal can be completed in the next 4 months.
According to details of the proposed deal published on the Tadawul, “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 Financial Group”.
Low economic growth and weak oil prices due to the pandemic have been pushing banks to consolidate across the Gulf region as they look to cut costs. The acquisition of Samba by NCB would lead to the formation of the third-largest lender in the region in terms of assets after the Qatar National Bank (QNB) and UAE’s First Abu Dhabi Bank.
NCB has a market value of nearly $30 billion which is more than double the value of Samba and 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 strengthen its lead. Samba is the country’s fifth-largest lender with assets of approximately $68 billion.
JPMorgan is advising National Central Bank, while Morgan Stanley is the advisory agency for Samba for the acquisition.