Abu Dhabi's NBAD and FGB to merge forming US$175b bank

[DUBAI] National Bank of Abu Dhabi PJSC is merging with rival First Gulf Bank PJSC in a deal that will create a regional powerhouse with US$175 billion of assets.

While FGB shareholders will hold 52 per cent of the combined entity, the bank will continue under the National Bank of Abu Dhabi name and FGB's shares will be de-listed, according to a statement on Sunday to the Abu Dhabi stock exchange. The exchange ratio of 1.254 NBAD shares for each FGB share implies a discount of 3.9% compared with the June 30 close. The chief executive officers of both banks will lose their jobs after the transaction.

The merger, billed by the lenders as one of equal partners, is part of Abu Dhabi's plan to create a bank that could compete in size with regional giants such as Qatar National Bank SAQ and expand overseas, people familiar with the deal said last month. It comes as the emirate grapples with a more than 50 per cent drop in oil prices over the past two years and as the industry battles falling profits after a decline in government spending.

"We will have the capital, expertise and international networks to be the preferred financial partner for anyone doing business along the West-East corridor," NBAD Chairman Nasser Ahmed Alsowaidi said in the statement. "We will act as the primary link for businesses and governments that want to access regional and global capital markets." CEO Change Alsowaidi is the vice chairman designate of the combined entity, while Abdulhamid Saeed, currently managing director of FGB, is the chief executive officer designate. FGB CEO Andre Sayegh and NBAD CEO Alex Thursby will continue to lead their banks independently until the merger.

The plan is expected to deliver cost savings of approximately 500 million dirhams (S$183 million) annually. Cost benefits are expected to be realized over three years, and the one-time integration expenses are expected to be about 600 million dirhams.

The Abu Dhabi government and related entities, which have stakes in both lenders, will own about 37 per cent of the combined entity.

"By having NBAD buying FGB, the entity secures a better credit rating right away," Jaap Meijer, a Dubai-based managing director for research at Arqaam Capital Ltd., said by telephone. "We see very strong merits of the merger."

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