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Saturday, Feb 22, 2025

Saudi lender NCB agrees to buy rival Samba for $15bn

Saudi lender NCB agrees to buy rival Samba for $15bn

New bank will have total assets of more than $220bn, creating the Gulf region's third-largest lender

National Commercial Bank, Saudi Arabia’s largest lender by assets, agreed to buy rival Samba Financial Group for $15 billion in the biggest banking takeover this year.

NCB will pay 28.45 riyals ($7.58) for each Samba share, according to a statement on Sunday, valuing it at about 55.7bn riyals. NCB will offer 0.739 new shares for each Samba share, at the lower end of the 0.736-0.787 ratio the banks set when they signed an initial framework agreement in June.

The offer is a 3.5 percent premium to Samba’s October 8 closing price of 27.50 riyals and about 24 percent higher than the level the shares traded at before the talks were made public. Bloomberg News first reported the merger discussions.

The new bank will have total assets of more than $220bn, creating the Gulf region’s third-largest lender. The entity’s $46bn market capitalization nearly matches that of Qatar National Bank QPSC, which is still the Middle East’s biggest lender with about $268 billion of assets.

Banks in the oil-rich Gulf have been combining as regional economies suffer the twin shocks of lower energy revenues and the global coronavirus pandemic. The Saudi consolidation also coincides with a long-awaited wave of banking measures in Europe, where lenders are exploring tie-ups or have begun taking over smaller rivals.

Merging two major domestic banks is a key component of Crown Prince Mohammed bin Salman’s “Vision 2030” initiative to diversify the Saudi economy away from oil by creating local champions in industries such as finance. The kingdom’s sovereign wealth fund - the Public Investment Fund - of which the crown prince is the chairman, will be the largest shareholder in the combined NCB-Samba entity with a 37.2 percent holding.

“Saudi Arabia is undergoing a historic transformation with Vision 2030,” said NCB’s current chairman, Saeed Al-Ghamdi. “Such a transformation requires a robust financial services sector, especially highly capitalized, resilient banks that can fund economic development, as well as support Saudi Arabia’s trade and capital flows with the region and the rest of the world.”

More details:

* NCB’s existing shareholders will own 67.4 percent and Samba’s shareholders will own 32.6 percent of the combined entity

* The transaction is expected to unlock about 800 million riyals annually fully phased in cost synergies after integration

* Ammar AlKhudairy, current chairman of Samba, to become chairman of merged bank; Saeed Al Ghamdi, the current chairman of NCB, to become managing director and group CEO

* NCB advised by JPMorgan Saudi Arabia; Samba advised by Morgan Stanley Saudi Arabia

* The deal is expected to close in the first half of 2021

* Consultant appointed to review the branding of new entity

The deal comes almost a year after NCB abandoned plans to merge with Riyad Bank, a deal that would have created a bank with about $200bn of assets. HSBC Holdings Plc’s local affiliate Saudi British Bank completed its acquisition of Alawwal Bank, which was part-owned by Royal Bank of Scotland Group Plc, in June last year.

Saudi Arabia has almost 30 local and international lenders serving a population of more than 30 million people.

The combined bank’s targeted cost synergy of nine percent is below regional peers, leaving room for an upside post integration. A better funding structure and an opportunity in cross-selling products should boost revenue by at least two percent, according to Bloomberg Intelligence analyst Edmond Christou.

The new leadership will assume their new roles after the conclusion of the merger in the first half of 2021, subject to approval of the nominations by the new board of directors.

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