The UAE banking sector is set to have a powerful new banking group following the decision of Abu Dhabi Commercial Bank (ADCB) and Union National Bank (UNB) to merge and together to acquire Al Hilal Bank. 

 

The transaction, which has been recommended unanimously to shareholders by the boards of ADCB and UNB, is subject to regulatory and shareholder approvals to be sought in the coming weeks, said a statement. 

 

The new banking group will carry the ADCB identity and will continue to benefit from strong institutional backing, through the Government of Abu Dhabi’s majority ownership. Al Hilal Bank will retain its existing name and brand and operate as a separate Islamic banking entity within the group. 

 

ADCB will reinforce its position as the third largest financial institution in the UAE and will become the fifth largest in the Gulf Cooperation Council (GCC) region, with assets of Dh420 billion ($114 billion). It is expected to have around one million customers, with a significant share of the UAE market (as at 30 September, 2018) including: 15% of total assets; 21% of retail loans; and 16% of deposits.

 

The transaction will create a robust platform to grow the bank’s consumer and wholesale businesses in both conventional and Islamic banking. The bank’s strategic objective will be to increase market share by prioritising excellence in customer service and continually innovating its product and service offering, particularly through digital channels, it said. 

 

Greater scale will permit larger scope for financing to support the UAE’s economic agenda for diversification and growth, and more investment in the bank’s people, technology and infrastructure, it added.

 

TRANSACTION STRUCTURE

The proposed transaction between ADCB and UNB will be executed through a statutory merger. ADCB will issue 0.5966 ADCB shares for every UNB share, corresponding to a total of 1,641,546,697 new shares issued to UNB shareholders. The exchange ratio implies a premium to UNB shareholders of 0.6% versus the closing price of the previous trading day (January 28, 2019) and 13.7% versus the pre-leak share price.

 

On the effective date of the merger, UNB shares will be delisted from the Abu Dhabi Securities Exchange. The combined bank will retain ADCB’s legal registrations. 

 

Al Hilal Bank will be acquired by the combined ADCB/UNB entity, for a consideration of approximately Dh1 billion, by issuing a mandatory convertible note for up to 117,647,058 post-merger ADCB shares to ADIC after the completion of the statutory merger, said the statement. 

 

The three banks will continue to operate independently until the combination becomes effective, which is expected within the first half of 2019. The combination is subject to approvals by shareholders and relevant regulators, including the UAE Central Bank. The transaction requires the approval of at least 75% by value of the shares represented at quorate general assembly meetings of each of ADCB and UNB. 

 

Following completion of the merger of ADCB and UNB and the acquisition of Al Hilal Bank, the Government of Abu Dhabi, through the Abu Dhabi Investment Council, will own 60.2% of the combined bank. Other ADCB shareholders will own 28.0%, and other UNB shareholders will own 11.8% of the combined bank. 

 

Eissa Mohamed Al Suwaidi is the chairman designate of the new banking group, and Mohamed Bin Dhaen Al Hamli is the vice chairman designate. Ala’a Eraiqat is the group chief executive officer designate of the new banking group. The new board and management of the combined bank will assume their new roles when the transaction becomes effective, it said. 

 

Al Suwaidi commented: “This is a very exciting transaction that will create a larger, preeminent and resilient banking group. It is a landmark deal for the UAE that will contribute significantly to our national ambitions. 

 

“The enlarged ADCB will have the scale and expertise to play a central role in the next stage of the UAE’s economic development.  By building on past successes to produce an even stronger, performance-driven and customer-centric institution, the combined bank will continue to set high standards for the UAE banking sector and contribute to Abu Dhabi’s development into a global financial centre.”

 

Eraiqat said: “This transaction is a confident and transformational move that creates a new, robust and agile financial institution, built on a strong track record in conventional and Islamic banking. With a wide and balanced customer base, the ADCB Group will focus its customer-centric growth strategy on its home market of the UAE, with a selective international presence. The bank will take advantage of scale and efficiency to invest further in developing its people, products, services and channels, with the objective of gaining greater market share. Furthermore, we will anchor our operations in robust governance, compliance and risk management, to ensure that the bank continues to act as a force for stability and strength in the financial system.

 

“The new bank is well-positioned to provide support for the UAE’s economic vision, and actively participate in the country’s growth and diversification,” he said. – TradeArabia News Service