Riyadh – Mubasher: The National Commercial Bank (NCB) and Samba Financial Group have entered into a framework agreement to begin a due diligence process and negotiate the terms of a potential merger.

The proposed transaction involves a merger by NCB to Samba Financial Group, according to a statement to the Saudi Stock Exchange (Tadawul) on Thursday.

A definitive agreement is expected within a period of four months from today.

Under the deal, shareholders of Samba Financial Group will receive between 0.736 and 0.787 newly issued share of NCB in exchange for every share they hold in Samba Financial Group.

“The two banks, as advised by their respective financial advisers, reached this range by performing financial analysis using a comprehensive and widely used set of valuation methodologies. The final exchange ratio will be determined in the definitive agreements of the Proposed Transaction,” according to the two banks respective statements.

The aforementioned exchange ratio range means that transaction will involve around 1,441 million to 1,540 million new NCB shares.

At a closing share price of SAR 37.25 per NCB share on 24 June 2020, the Proposed Transaction, if completed within that range, would value each Samba Financial Group share at SAR 27.42 – SAR 29.32, which represents a premium of 19.2% to 27.5% to the Samba Financial Group share price as of 24 June 2020.

Going through with the non-binding agreement is subject to reciprocal due diligence process, as well as regulatory approvals from the Saudi Arabian Monetary Authority (SAMA), the Capital Market Authority (CMA), the General Authority for Competition, as well as the shareholders of the two banks.

In addition, NCB and Samba do not expect that the proposed merger will, if completed, result in the involuntary redundancy of employees.

NCB has appointed J.P. Morgan Saudi Arabia Company as its financial advisor, and Abuhimed Alsheikh & Alhagbani Law Firm as its legal advisor for the proposed transaction.

Meanwhile, Samba has appointed Morgan Stanley Saudi Arabia as its financial advisor, and Khoshaim & Associates as its legal advisor.

Earlier, the Saudi Stock Exchange (Tadawul) suspended trading the shares of the two companies for one trading session pending a material disclosure.