The parent company of Samba Bank, Samba Financial Group of Kingdom of Saudi Arabia has entered into a framework agreement with the National Commercial Bank of Kingdom (NCB) for merger and acquisition.
According to a notification issued to PSX, the two banks will carry out reciprocal due diligence and negotiate definitive and binding terms that will result in the acquisition of stakes in Samba Financial Group by the National Commercial Bank.
Analysts estimated that the proposed deal would value samba share at SAR 27.42 – SAR 29.32, which represents a premium of 19.2% – 27.5% share price as of 24 June 2020.
The National Commercial Bank offered to pay as much as $15.6 billion to acquire rival Samba Financial Group.
According to the deal, NCB will issue as many as 1.54 billion new shares to Samba shareholders. Samba shareholders receive between 0.736 and 0.787 newly-issued shares of NCB in exchange for each Samba share they hold.
Samba Financial Group is the major shareholder of the Samba Bank in Pakistan having 84.5 percent stakes. The bank also operates in Dubai, Qatar, and Saudi Arabia.
The bank is operating 40 branches in 12 major cities of Pakistan. It made a profit of Rs. 251 million in the first quarter of 2020.
The combined bank would have total assets of about $210 billion after the merger, making it the third-largest in the region behind Qatar National Bank and First Abu Dhabi Bank. Both proposed merger banks had a combined 29% market share based on last year’s financials.
The kingdom’s sovereign wealth fund, also known as the Public Investment Fund, is the largest shareholder in both NCB and Samba, owning about 44% of NCB and 23% of Samba.
Saudi Arabia has been taking steps to shore up its banking sector from the double whammy of the coronavirus shock and lower oil prices. Lenders in the world’s largest oil exporter – already dealing with weak private sector loan growth – are expected to be hit hard as lockdown measures and lower government spending impact earnings and increase defaults.