FGB May Pay 14% Premium in Abu Dhabi Bank Deal, Arqaam Says

  • National Bank would be the junior partner in deal with FGB
  • Merger may force other Abu Dhabi banks to consolidate

First Gulf Bank PJSC could pay a premium of as much as 14 percent to buy National Bank of Abu Dhabi PJSC in a deal that would combine two of the biggest banks in the Middle East, according to a report by Arqaam Capital Ltd.

NBAD, which is 69 percent owned by sovereign wealth fund Abu Dhabi Investment Council, would play the role of a junior partner in a deal, analyst Jaap Meijer said in a research report Thursday. Meijer said a combination between the two may also pressure other banks in the country to merge.

NBAD and FGB are exploring a potential combination to create the largest lender in the region, people familiar with the matter said Thursday. The deal would create a lender with assets of about $170 billion, surpassing those of Qatar National Bank SAQ. NBAD and FGB declined to comment on a tie-up.

At a 14 percent premium to NBAD’s current market price, FGB would pay about $12.9 billion for its rival. NBAD’s shares have declined 26 percent in the last 12 months. FGB has dropped 22 percent.

“We see strong merits for a potential transaction, notably better diversification, cost optimization, increased single party exposures and substantial funding advantages,” Meijer said in the note.

A deal would mark the U.A.E’s first major banking-industry merger since National Bank of Dubai and Emirates Bank International combined to create Emirates NBD PJSC in 2007. Emirates NBD Chief Executive Officer Shayne Nelson has called for further consolidation, saying too many banks are serving a relatively small population.

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