Saudi British Bank (SABB) and Alawwal Bank have agreed to a preliminary and non-binding deal to merge their activities through a share exchange ratio.
Under the preliminary agreement, Alawwal bank shareholders would receive 0.485 SABB shares for each share. Based on this exchange ratio and closing price of the shares of the two entities, the deal is expected to value SAR18.6bn ($4.96bn).
In a statement, Alawwal Bank said that the discussions are now at an advanced stage.
The merger is subject to signing of a binding agreement as well as other customary closing conditions including shareholder and regulatory approvals.
The deal, if completed, would create a lender with assets of nearly $77bn – making it the third largest bank of Saudi Arabia.
HSBC Holdings owns 40% stake in SABB, while RBS Holdings consortium holds 40% stake in Alawwal.
The consortium RBS Holdings includes Royal Bank of Scotland (RBS), which owns 15% stake in Alawwal through it.
The two parties started discussions on possible merger since the last year but it saw limited progress as Saudi Arabian regulatory environment for bank acquisitions is comparatively untested, reported Reuters.
Alawwal Bank stated that the progress of merger discussions will be announced as it happens.
Everything falling in line, the merger may be completed by the end of this year, two sources told Reuters.