Saudi Arabia's National Commercial Bank - the country's biggest in terms of assets - said it will take over competitor Samba Financial Group in a deal worth nearly $15 billion and forming what will be the kingdom's No. 1 bank.
Some $223 billion in assets are set to be added to National Commercial Bank's portfolio - including a market capitalization of $46 billion after the consolidation is granted regulatory approvals, the bank said in a filing on Saudi's Tadawul stock market which announced the merger.
NCB said it will pay $7.58 for each Samba share - valuing the smaller bank at almost 56 billion riyals ($14.93 billion). Saudi's sovereign wealth fund will have the biggest share with 37%. Falling prices of oil and poor economic growth are prompting banks across the Gulf to merge.
The kingdom has encouraged mergers as it seeks more robust banks to bolster the role private companies can take in its campaign to diversify its oil-reliant market.
NCB and Samba Financial Group described the partnership as very suitable for the kingdom's Vision 2030 initiative - the brainchild of Saudi Arabia's Crown Prince Mohammed bin Salman. The proposal calls for the country to concentrate less on oil exports while providing employment for millions of young people.
Banks in the region have been forming alliances as sectoral economies bear the brunt of lower energy profits and the world health crisis. There have been several banking mergers in Europe, too, where finance groups are exploring deeper ties or have started buying smaller competitors.
According to NCB, its consolidation with Samba Financial will give rise to the "biggest and a premier bank in the Middle East with 171 billion riyals in market capitalization," Reuters quoted NCB as saying.
