Abu Dhabi’s NBAD, FGB okay plan to form $175-bn bank

Dubai, July 4: National Bank of Abu Dhabi is merging with rival First Gulf Bank in a deal that will create a regional powerhouse with $175 billion of assets.

While FGB shareholders will hold 52% of the combined entity — billed as a merger of equals — the lender will operate under the National Bank of Abu Dhabi name and FGB’s shares will be delisted, according to a statement on Sunday.

NBAD will exchange 1.254 of its own shares for each FGB share, implying a 3.9% discount to the June 30 close. The CEOs of both banks will continue until the merger takes place, after which FGB managing director Abdulhamid Saeed will take over.

Abu Dhabi is combining its largest banks to better compete in size with regional rivals such as Qatar National Bank and bolster its ability to lend and secure funding as it grapples with a more than 50% drop in oil prices over the past two years. The merger may presage further consolidation in the United Arab Emirates’ financial services industry where about 50 lenders compete in a market of about 9 million people.

“Creating a megabank in Abu Dhabi will help the sovereign cut costs of funding for megaprojects and also reduce lenders in the overbanked country,” said Reda Gomaa, a portfolio manager at Mashreq Asset Management in Dubai. “The merger terms will bring NBAD’s valuation close to that of FGB.”

The transaction will end the tenure of Andre Sayegh and Alex Thursby as CEOs of FGB and NBAD, respectively. Thursby joined NBAD almost exactly three years ago. Abdulhamid Saeed, the CEO designate, is a former Citibank employee. The plan will deliver savings of about 500 million dirhams ($136 million) annually, though integration costs will be about 600 million dirhams. The Abu Dhabi gover nment and related entities will own about 37% of the merged bank. Bloomberg