Saudi Arabia's biggest lender National Commercial Bank (NCB) on Sunday entered a binding merger agreement with smaller lender Samba Financial Group to create a combined entity with 837 billion riyals ($223 billion) in assets. Once completed, the NCB-Samba merger would lead to the creation of the Gulf region's third largest lender by assets, after Qatar National Bank (QNB) and UAE's First Abu Dhabi Bank (FAB). Under the agreement, NCB paid 28.45 riyals for each Samba share, valuing it at approximately 55.7 billion riyals ($14.85 billion), NCB said in a bourse filing on Sunday. This corresponds to a 3.5 percent premium to Samba's closing share price as of October 8, the last business day before Sunday's announcement. The decline in oil prices and weak economic growth have been pushing bank consolidation across the Arab Gulf. Saudi Arabia has encouraged consolidation in the banking sector, aiming to create stronger entities able to support the role the private sector can play in its push to diversify its oil-reliant economy. "The merged bank will become the largest bank in the Kingdom and a leading bank in the Middle East region with 171 billion riyals in market capitalisation," NCB statement read. The Public Investment Fund (PIF), Saudi Arabia's sovereign wealth fund, is a key investor in both banks, with current stakes of 44.29 percent in NCB and 22.91 percent in Samba. After the merger, PIF is set to capture a 37.2 percent stake in the new entity. Other substantial shareholders of the merged bank will comprise of the Saudi Public Pension Agency with a 7.4 percent stake and the General Organisation for Social Insurance (GOSI) with a 5.8 percent stake. After the completion of the merger, shareholders of Samba will obtain 0.739 new NCB shares for every one share of Samba, NCB added. Ammar Alkhudairy, Samba chairman, will be chairman of the merged entity while Saeed al-Ghamdi, NCB's current chairman, will be managing director and chief executive officer. The new entity will have both investment arms of the current lenders, NCB Capital and Samba Capital. The merger is not expected to lead to an involuntary redundancy of employees, NCB stated without elaborating.
