Abu Dhabi’s planned merger of two of its largest banks is unlikely to be structured as a takeover of National Bank of Abu Dhabi PJSC by First Gulf Bank PJSC, according to people familiar with the matter.
The emirate may structure the deal as a merger of equals, one of the people said, with two of the people familiar saying it would be unlikely that FGB takes over NBAD as some analysts have speculated. No final decision has been made on the structure of the deal and talks are ongoing, the people said.
Abu Dhabi is backing a merger of its two largest lenders because it’s keen to create a bank that could compete with Qatar National Bank SAQ and expand overseas, the people said. A combined entity could boost lending and benefit from lower borrowing costs, giving it greater regional influence, the people said, asking not to be identified because the plans are private.
Khaldoon Mubarak, chief executive officer of Mubadala Development Co., and senior executives at Abu Dhabi Investment Council, chaired by crown prince Sheikh Mohammed Bin Zayed Al Nahyan, are playing a key role in the discussions, two of the people said. Management of both banks are in daily talks, one of the people said.
Arqaam Capital analysts are among those that have speculated that NBAD would be the “junior partner” in any merger between the two banks. FGB may pay a 14 percent premium to buy NBAD, Arqaam analyst Jaap Meijer said in a research note last week.
NBAD shares have risen about 20 percent since Bloomberg News first reported that the two companies were in merger talks on June 16, while FGB has risen about 6 percent.
Reviving Consolidation
“The new entity would benefit from strong synergies domestically and have the capability to compete internationally with a stronger ability to channel liquidity into the country,” Rami Sidani, head of frontier investments at Schroders Plc in Dubai, said in e-mailed comments.
FGB and Mubadala declined to comment. National Bank of Abu Dhabi wasn’t immediately available to comment. No one was immediately available at Abu Dhabi Investment Council.
Source: Bloomberg.com