The Saudi British Bank (SABB) and Alawwal Bank have entered into a binding merger agreement, whereby the assets and liabilities of Alawwal will be transferred to SABB, a bourse statement said.
The deal is expected to be finalized during H1 2019, and is set to create Saudi Arabia's third-largest bank, and provide “unrivalled access to a global banking network to facilitate the flow of investment capital into Saudi Arabia and the growth of international trade,” a combined statement added.
On completion of the merger, Alawwal brand will cease to exist as a legal entity, and instead new shares in SABB will be issued to Alawwal's shareholders.
Alawwal shareholders will receive 0.48535396 new SABB shares for each Alawwal share, that will be issued by means of a capital increase that will raise SABB's paid-up capital by 37 percent to SAR 20.5 billion. The bank's issued shares will increase to 2.05 billion (from 1.5 billion).
Based on the exchange ratio and the closing price of SAR 33.51 per SABB share on May 14, 2018 (the last business day prior to the announcement), Alawwal shares are valued at SAR 16.26 each, with its existing issued ordinary share capital valued at nearly SAR 18.6 billion.
When the deal is completed, SABB’s existing shareholders will own a 73 percent stake, while Alawaal’s shareholders will own the remaining 27 percent of the resulting shareholding.
The main shareholders of the combined bank will be HSBC Holdings B.V. (29.2 percent), Olayan Saudi Investment Co. (18.2 percent), NatWest Markets N.V. (10.8 percent) and the General Organisation for Social Insurance (9.9 percent).
NatWest Markets N.V. is the legal entity representing a consortium of international shareholders comprising The Royal Bank of Scotland Group plc (indirectly holding 4.1 percent of the combined bank), Stichting Administratiekantoor Beheer Financiële Instellingen ("NLFI") (indirectly holding 3.7 percent of the combined bank) and Banco Santander, S.A. (indirectly holding 3.0 percent of the combined bank).
Subject to regulatory approvals, NatWest Markets is planning to split its stake and NatWest Markets plc, Santander and NLFI will become direct shareholders in the combined bank. NatWest Markets plc is an affiliate of RBS Group plc that is expected, subject to regulatory and internal approvals, to hold RBS Group plc's ownership in the combined bank following the merger completion.
Merging the two institutions will form a bank with a stock market capitalisation of approximately SAR 64.6 billion ($17.2 billion).
On a pro forma basis, the combined bank will have a loan to deposit ratio of 86.6 percent and assets of SAR 268 billion ($71 billion) as at June 30, 2018.
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Balance Sheet for Q2 2018 (SAR bln) |
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Item |
SABB |
Alawwal |
|
Assets |
183.01 |
84.88 |
|
Clients’ deposits |
132.93 |
66.18 |
|
Net loans |
113.36 |
59.13 |
|
Capital |
15.00 |
11.43 |
|
Shareholders’ equity |
32.85 |
13.46 |
Below is the predicted data of the resulting entity:
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Predicted Data of Resulting Entity |
|
|
Resulting Entity |
|
|
Market capital |
SAR 64.6 bln |
|
Total Assets |
SAR 268 bln |
|
Loans to deposits (%) |
86.6 % |
|
Corporate loans (%)* |
77 % |
|
Retail loans (%) |
23 % |
*As of June 30, 2018
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