Saudi Arabia’s biggest lender National Commercial Bank (NCB) said that it entered into a framework agreement with Samba Financial Group to begin a reciprocal due diligence process and to negotiate a potential merger of the two entities.

Subject to the results of the reciprocal due diligence exercise, the shareholders of Samba Financial Group will receive between 0.736 and 0.787 newly issued share of NCB in exchange for every share they hold in Samba Financial Group, NCB said in a bourse filling.

Based on this exchange ratio range, the total consideration payable by NCB to Samba Financial Group’s shareholders, should the proposed transaction complete within that range, will be between approximately 1,441 million to 1,540 million new NCB shares.

At a closing share price of SR37.25 ($9.92) per NCB share on June 24, the proposed transaction would value each Samba Financial Group share at SR27.42 ($7.30) – SR29.32 ($7.80), which represents a premium of 19.2% - 27.5% to the Samba Financial Group share price as of June 24.

The parties have also agreed in the framework agreement that they will negotiate definitive agreements in relation to the proposed transaction that will set out the relevant commercial terms thereof, including the final structure of the proposed transaction, the final exchange ratio, the name of the merging bank and the approach to its branding, the composition of the board and the parties’ approach to the management of the merging bank, and the location of the head office of the merging bank.

The parties intend to conclude the reciprocal due diligence process and sign the definitive agreements in relation to the proposed transaction within a period of four months from the date of this announcement.

NCB has appointed JP Morgan Saudi Arabia Company as its financial advisor, and Abuhimed Alsheikh & Alhagbani Law Firm as its legal advisor for the proposed transaction.

Samba has appointed Morgan Stanley Saudi Arabia as its financial advisor, and Khoshaim & Associates as its legal advisor. – TradeArabia News Service