NCB, Samba sign framework agreement for potential merger

National Commercial Bank (NCB) signed a framework agreement with Samba Financial Group today to begin due diligence process, and negotiate definitive and binding terms of a potential merger, the bank said in a bourse filing on Thursday.

Shareholders of Samba will receive between 0.736 and 0.787 newly issued share of NCB in exchange for every share they hold in Samba, subject to the results of the reciprocal due diligence exercise.

The two banks, as advised by their respective financial advisers, reached the above exchange ratio range by performing financial analysis using a comprehensive and widely used set of valuation methodologies. The final exchange ratio will be determined in the definitive agreements of the proposed transaction.

The total consideration payable by NCB to Samba’s shareholders will be between 1.44 billion to 1.54 billion new NCB shares, based on the above exchange ratio range.

At a closing share price of SAR 37.25 per NCB share on June 24, the proposed deal, if completed within that range, would value each Samba shares at SAR 27.42–SAR 29.32, representing a premium of 19.2%-27.5% to Samba close price on June 24.

The parties intend to conclude the reciprocal due diligence process and sign the definitive agreements within 4 months from the date of this announcement.

NCB does not expect that the proposed merger will result in the involuntary redundancy of employees.

The proposed deal involves related parties and directors who have a conflict of interest in relation to it, which will be assessed by NCB for the purpose to ensure compliance with the relevant rules and regulations. The details of all related parties and conflicted directors will be announced at a later stage.

NCB appointed J.P. Morgan Saudi Arabia Company as its financial advisor, and Abuhimed Alsheikh & Alhagbani Law Firm as its legal advisor.

The bank will announce any material developments on the proposed transaction in due course.

In December 2019, the board of directors of NCB and Riyad Bank agreed to back out of their merger negotiations, which started end of 2018.

According to Argaam calculations, the potential merger between NCB and Samba will create the largest bank in Saudi Arabia, with assets amounting to SAR 802 billion.

The 3 major shareholders in the two banks are:

- Public Investment Fund owns 44.29% of NCB and 22.91% of Samba

- Public Pension Agency holds 5.36% stake in NCB and 11.54% stake in Samba

- General Organization for Social Insurance (GOSI) owns 5.18% of NCB and 7.09% of Samba

 *Unaudited data

In the event of the merger going ahead, it will be the second in the Saudi banking sector after Saudi British Bank (SABB) and Alawwal Bank successful merger last year.