Details of Saudi British – Alawwal merger

Details of Saudi British – Alawwal merger

The merger between Saudi British Bank (SABB) and Alawwal Bank (formerly-known as Saudi Hollandi Bank) will entail all of Alawwal's assets and liabilities being transferred to SABB, after which SABB will continue to exist while Alawwal will cease to exist and its shares will be cancelled. Alawwal shareholders will receive 0.485 new SABB shares. The exchange ratio represents a 28.5% premium to the Alawwal's closing price on 14 May 2018, which was the last business day before the bank's issued a cautionary announcement.

After the merger, SABB's existing shareholders will own 73% of the new bank and Alawwal Bank's shareholders 27%. 

The stock exchange announcement states that the main shareholders of the merged bank will be HSBC Holdings (29.2%), Olayan Saudi Investment Company (18.2%), NatWest Markets (10.8%) and the (Saudi) General Organisation for Social Insurance (9.9%). 

NatWest Markets is the legal entity representing a consortium of three shareholders: Royal Bank of Scotland (indirectly holding 4.1%), a Dutch government vehicle (3.7%), and Banco Santander (3%). These three organisations have become shareholders in Alawwal as a result of the takeover of ABN-AMRO (which held 40% of Saudi Hollandi Bank) by Royal Bank of Scotland, Santander and Fortis Bank in 2007, and the subsequent nationalisation of Fortis Bank during the global financial crisis. NatWest Markets intends to split the 10.8% that it is holding to enable the three consortium members to become direct shareholders of the bank. NatWest Markets will hold the Royal Bank of Scotland shares. 

The stock exchange announcement said that the merged institution has a stock market capitalisation of approximately $17.2bn, making it the third biggest Saudi bank. The bank's paid up capital will increase by 37% to $5,479mn as a result of the merger. 

The current HSBC-appointed Managing Director, David Dew, will be the Managing Director of the merged bank. Lubna Olayan will become the Chairman of the Board – the first woman to chair the board of a listed Saudi company. The Board will have 11 members, of whom seven will be current directors of SABB (and three of those will be from those appointed by HSBC), and four will be proposed by Alawwal. The merged bank will have the right to use the HSBC logo.

The Managing Directors of SABB and Alawwal will continue to lead their banks until the merger is complete.

The full text of the announcement to the Saudi stock exchange can be seen here.

The merger will reduce the number of local Saudi commercial banks to 11. There are 12 foreign banks operating in the Kingdom. One of these is Gulf International Bank, which is Saudi-owned but headquartered in Bahrain and licensed by the Central Bank of Bahrain. 

First Abu Dhabi Bank (which was created in 2017 through the merger of National Bank of Abu Dhabi and First Gulf Bank) expects to open branches in Saudi Arabia by the end of 2018, having received a license to do so earlier this year.