Abu Dhabi banks merge to form new US$175b lender

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ABU DHABI — The board of directors at National Bank of Abu Dhabi PJSC (NBAD) and First Gulf Bank PJSC (FGB) have agreed to a merger that will create a lender with US$175 billion (RM400 billion) assets in the first quarter of next year.

The deal, which is subject to shareholders’ approval, will be executed via a share swap, the banks said in a joint statement to the Abu Dhabi bourse. The transaction will be a combination of equals, according to the statement, and FGB’s shares will be delisted following the merger. The plan is expected to deliver cost synergies of approximately 500 million dirhams (RM545 million) annually. Cost benefits are expected to be realised over three years, and the one-time integration expenses are expected to be about 600 million dirhams (RM654 million).

The merger is part of Abu Dhabi’s plan to create a bank that could compete with Qatar National Bank SAQ and expand overseas, people familiar with the deal said last month. It comes as the emirate copes with a more than 50% drop in oil prices over the past two years and as the banking industry battles falling profits due partly to lower government spending.

“We will have the capital, expertise and international networks to be the preferred financial partner for anyone doing business along the West-East corridor,” NBAD chairman Nasser Ahmed Alsowaidi said in the statement. “We will act as the primary link for businesses and governments that want to access regional and global
capital markets.”

FGB shareholders will receive 1.254 NBAD shares for each FGB share they hold, implying a 3.9% discount based on stock’s closing price last Thursday. FGB shareholders will own about 52% of the combined bank, and NBAD shareholders 48%. The Abu Dhabi government and related entities, which have stakes in both lenders, will own about 37%.

Alsowaidi is the vice chairman designate of the combined entity, while Abdulhamid Saeed, currently managing director of FGB, is the chief executive officer designate. FGB CEO Andre Sayegh and NBAD CEO Alex Thursby will continue to lead their banks independently until the merger.
— Bloomberg