Alawwal Bank and Saudi British Bank have reached an initial agreement on some of the terms of a planned merger that would create the third-biggest bank in Saudi Arabia with more than $70 billion in assets.
The banks' boards reached a preliminary, nonbinding agreement on a share exchange ratio that would see Alawwal shareholders receive 0.485 SABB share for each share that they hold in Alawwal. Based on the exchange ratio and SABB's closing price of 33.5 riyals on May 14, the merger would value each Alawwal share at 16.3 riyals and the bank's existing issued ordinary share capital at about 18.6 billion riyals.
A binding agreement to proceed with the merger has not yet been signed, and any such deal will be subject to approvals from the Saudi Arabian Monetary Authority, among other regulatory bodies, and shareholders, Alawwal said.
"This announcement does not mean that the proposed merger will be agreed between the two parties or that an offer will be eventually made by SABB to Alawwal Bank shareholders in relation to the proposed merger," the banks said, adding that they do not expect any involuntary staff layoffs resulting from the potential merger.
The two Saudi lenders have been in merger talks since late April 2017. The potential transaction has taken longer than expected as the regulatory environment for mergers in Saudi Arabia is relatively untested, with the last significant merger taking place about 20 years ago, Reuters reported in January.
Royal Bank of Scotland Group PLC and HSBC Holdings PLC hold a 40% stake in Alawwal Bank and Saudi British Bank, respectively, according to S&P Global Market Intelligence data.
As of May 15, US$1 was equivalent to 3.75 Saudi Arabian riyals.
