Saudi British Bank (SABB), a subsidiary of HSBC, has finalized its $5bn merger agreement with Riyadh-based rival Alawwal Bank to create the third largest bank in Saudi Arabia, valued at around $17bn.
The Saudi British Bank, Alawwal Bank merger has been approved by their respective boards of directors who will recommend shareholders to vote in favor of the transaction.
As per a non-binding agreement announced by the parties in May 2018, each share of Alawwal Bank will be exchanged for 0.485 shares of Saudi British Bank.
Based on the exchange ratio, each share of Alawwal Bank has been valued at SAR33.5 ($8.93) as on 14 May 2018 with the company’s existing issued ordinary share capital valued at around SAR18.6bn ($4.96bn).
Following the merger, the combined banking company will have a consolidated strength in corporate and retail banking apart from providing access to a global banking network that is expected to enable international investment capital into Saudi Arabia.
SABB chairman Khaled Suleiman Olayan said: “As Vision 2030 transforms Saudi Arabia, our own transformation will ensure our customers capture the opportunities of a more diverse, accessible and investible Saudi economy.
“We will enable growth in the private sector with the expertise to help all businesses, from SMEs to large corporates that compete nationally and internationally. Our bank will supply entrepreneurs with the financial tools needed to grow and create jobs and we will have enhanced capacity to underwrite large-scale transactions to support infrastructure and privatisation projects.”
The combination of Saudi British Bank and Alawwal Bank is expected to have a better position in corporate banking, cash management, foreign exchange and trade finance.
It is also anticipated to be the preferred choice for wealth management banking among other banking and financing services, backed by the online and mobile services of the merging firms.
Alawwal Bank chairman Mubarak Abdullah Al-Khafrah said: “Together, we will set new standards for customers by pooling the talents and experience of two of the Kingdom’s longest-established banks. By building on our shared heritage of innovation, we will ensure we are the best place to bank and the best place to work in Saudi Arabia.
“Our combined bank is expected to deliver attractive long-term shareholder value, generating new growth by ensuring our customers have access to a full suite of services.”
The merger is subject to shareholder and regulatory approvals.