Sand in the gears

25 June 2020 By Liam Proud Follow @liamwardproud

The kingdom’s biggest lender NCB wants an all-share combo with Samba, having dropped its pursuit of Riyad Bank last year. Local retail investors may shrug at the prospect of creating a banking champion. That means the acquirer will have to pay towards the top of a mooted range.

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National Commercial Bank, Saudi Arabia's biggest lender, said on June 25 it had signed an initial agreement with smaller lender Samba Financial to create a combined entity with almost $214 billion in assets.

NCB's offer would value each Samba share at 27.42 riyals to 29.32 riyals ($7.82), giving it a maximum market value of $15.63 billion, 27.5% above its market value of nearly $12.3 billion, based on June 24’s closing price.

If completed, the merger would create one of the region's largest lenders by assets, ranking third after Qatar National Bank and United Arab Emirates’s First Abu Dhabi Bank.

In a bourse filing, NCB said it had signed a framework agreement for a potential merger with Samba, confirming an earlier Reuters story on the merger talks.

NCB has a market value of nearly $30 billion, more than double that of Samba, which according to Refinitiv data is the kingdom's fourth largest lender by assets.

Saudi Arabia's sovereign wealth fund, the Public Investment Fund is a major investor in both banks, with a stake of 44.29% in NCB and 22.91% in Samba. The Public Pension Agency and the General Organization for Social Insurance are also substantial shareholders in both banks.

JPMorgan is advising NCB, while two sources told Reuters Morgan Stanley is advising Samba.

Samba shares closed up 4.1% at 23.94 Saudi riyals on June 25. NCB shares were flat at 37.25 riyals.

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