HSBC, RBS Saudi Bank ventures reach initial deal on merger terms

[DUBAI] HSBC Holdings and Royal Bank of Scotland Group's banking affiliates in Saudi Arabia reached an initial agreement on the terms of a possible merger.

Alawwal Bank, which is 40 per cent owned by RBS, and Saudi British Bank reached a preliminary, non-binding agreement on the share exchange ratio, according to a statement on the Saudi stock exchange on Wednesday. Alawwal shareholders will receive 0.485 SABB shares, valuing each Alawwal share at 16.3 riyals.

A potential merger would value Alawwal's existing issued ordinary share capital at approximately about 18.6 billion riyals (S$6.7 billion) and a premium of 29 per cent on Monday's closing price.

The deal would mark Saudi Arabia's first bank merger for almost 20 years and will create an entity with about US$73 billion in assets. International lenders are grappling with how to approach the Middle East's biggest economy, which is embarking on an unprecedented diversification and privatisation plan but still blocks foreign control of local banks.

BLOOMBERG