Leading Abu Dhabi lenders National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB) said its boards of directors have recommended merging the two banks with the deal expected to be completed in the first quarter of 2017.

The merger will be completed via a share swap agreement which would result in shareholders of FGB receiving 1.254 new NBAD shares for every one FGB share they currently hold.

The merger, to be completed via a share swap agreement, will create the largest bank in the Middle East and North Africa (Mena) region with its total assets surging to a record Dh642 billion ($175 billion).
 
The proposed merger will create a bank with the financial strength, expertise, and global network to support the UAE’s economic ambitions at home and drive the country’s growing international business relationships, said the Abu Dhabi lenders in a joint statement.

It will also boast a combined market capitalisation of Dh106.9 billion ($29.1 billion), the statement added.

The mrger will make it the leading financial institution in the UAE with a 26 per cent share of outstanding loans, and will operate an international network of branches and offices spanning 19 countries.

Both entities will continue to operate independently until the merger becomes effective, which is expected in the first quarter of 2017.

The proposed transaction is a merger of equals and will be executed through a share swap, with FGB shareholders receiving 1.254 NBAD shares for each FGB share they hold.

The exchange ratio implies a discount to FGB's shareholders of 3.9 per cent based on closing share prices on June 30, 2016, and a discount of 12.2 per cent to the three months’ average pre-leak share price as on June 16.

FGB chairman Sheikh Tahnoon Bin Zayed Al Nahyan said the new, well-balanced bank will be an engine of UAE growth, driving further investment and economic diversification, and advancing the ambitions of entrepreneurs and the people they employ.

"The bank will have the strength and expertise to support the development of the UAE’s private sector, from SMEs to large companies gathering strength to expand beyond their national borders. It is well positioned to be the strategic banking partner to the government and its agencies," he noted.

NBAD chairman Nasser Ahmed Alsowaidi said: "Now, more than ever, the UAE will benefit from a strong, financial partner with the capacity to meet new challenges, drive domestic growth, and support the country’s ever-greater connections to the global economy."

"Expansion across fast growing emerging markets presents a vast business opportunity for our customers and for us, as a larger, stronger, combined bank. We will have the capital, expertise and international networks to be the preferred financial partner for anyone doing business along the West-East corridor," stated Alsowaidi.

"And, we will act as the primary link for businesses and governments that want to access regional and global capital markets" he added.

On the effective date of the merger, FGB shares will be delisted from the Abu Dhabi Securities Exchange.

Abdulhamid M. Saeed, a board member and managing director at FGB, has been named chief executive designate for the combined lender, with FGB chairman Sheikh Tahnoon is the chairman designate.
 
On the merger, Saeed said: "FGB and NBAD are two of the country’s most successful banks with proven growth strategies. They are highly complementary businesses, each with strong and experienced leadership teams."

"The new bank will draw on these strengths to provide excellent service to our customers and take advantage of the opportunities we see in our home market and internationally," he added.-TradeArabia News Service