Qatari Masraf Al Rayan QSC has agreed to buy Al Khalij Commercial Bank PQSC in a $ 2.2 billion share swap – marking the Middle East’s first takeover this year.
Masraf Al Rayan QSC has agreed to buy Al Khalij Commercial Bank PQSC in a share swap that will create Qatar’s second-largest lender in the first takeover of the year in the Middle East.
Masraf Al Rayan will pay a 21% premium on the closing Al Khalij share on Tuesday and issue 0.5 shares for each Al Khalij share, the lenders said in a statement on Thursday. The deal is valued at 8.2 billion riyals ($ 2.2 billion), according to Bloomberg data.
By taking over smaller rival Al Khalij, Masraf Al Rayan will overtake his next two biggest rivals by giving him $ 47 billion in assets – still six times less than that of Qatar National Bank QPSC. Qatar has 2.5 million people served by around 20 local and international banks, putting small lenders at a disadvantage unless they find a niche or competitive advantage.
The combination “will create a bigger and stronger financial institution with a solid financial position and significant liquidity available to support Qatar’s economic growth,” the lenders said. The merger will also result in cost savings and revenue synergies.
Ali Bin Ahmad Al Kuwari will become chairman and Sheikh Hamad Bin Faisal Bin Thani Al-Thani will become vice chairman of the merged entity. The executive committee of the council will be chaired by Sheikh Hamad Bin Faisal Bin Thani Al-Thani.
Shares of Masraf Al Rayan gained 1.2% at the close on Thursday, while shares of Al Khalij rose 2.8%.
Masraf Al Rayan and Al Khalij began talks in June last year amid a wave of bank consolidations in the Gulf financial sector. Lenders are looking to develop a scale to deal with the fallout from falling oil prices and the economic devastation caused by the coronavirus pandemic.
The series of significant transactions helped consolidate a fragmented industry. Saudi Arabia’s largest lender, the National Commercial Bank, last year bought Samba Financial Group for $ 15 billion in one of the biggest bank takeovers of 2020.
JPMorgan Chase & Co. is the financial advisor to Al Rayan and Al Khalij.