Alawwal, SABB proposed merger talks in advanced stage

Talks on the proposed merger between Alawwal Bank and Saudi British Bank (SABB) are at an advanced stage with a preliminary share exchange ratio been agreed, both banks said in separate statements to Tadawul on Wednesday.

The boards of two banks have reached a preliminary, non-binding agreement on the share exchange ratio, subject to a number of important steps that includes completion of confirmatory due diligence, finalization of the merger agreement and agreement on a number of other commercial issues, the statement added.

Based on the preliminary agreement, Alawwal Bank shareholders would receive 0.485 SABB shares for each Alawwal Bank share.

Based on the exchange ratio and the closing price of SAR 33.5 per SABB share on May 14, 2018 - the last trading day prior to the date of this announcement - the merger would value each Alawwal Bank share at SAR 16.3 and Alawwal Bank's existing issued ordinary share capital at approximately SAR 18.6 billion.

This represents a premium of 28.5 percent to the Alawwal Bank share price as of May 14.

A binding agreement is yet to be entered into between Alawwal Bank and SABB.

Any binding agreement to proceed with the merger will be subject to a number of conditions, including SAMA, other regulatory authorities, and the shareholders' approval, the bank said.

The transaction involves related parties, and details will be announced in due course.

The two banks added that the 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.

Alawwal and SABB do not expect that the proposed merger will if completed, result in any involuntary layoff of employees, the statements added.

HSBC Holdings has a 40 percent stake in SABB while Royal Bank of Scotland owns 40 percent of Alawwal via its acquisition of ABN AMRO.