Dubai
Masraf Al Rayan (Al Rayan) and Al Khalij Commercial Bank (Al Khaliji) announced they have entered into a merger agreement following the announcement on June 30 last year of a potential merger. Following the merger, Al Khaliji’s business will be absorbed into Al Rayan’s business, and Al Rayan will be the remaining legal entity, which will continue to operate in accordance with Islamic Shariah principles.
The proposed merger between Al Rayan and Al Khaliji will be effected by a statutory merger, whereby Al Khaliji will be dissolved and all of its assets and liabilities shall become part of Al Rayan by operation of law with effect from completion of the Merger. Al Rayan will issue 0.50 Al Rayan shares for every Al Khaliji share, corresponding to a total of 1,800mn new shares issued to Al Khaliji shareholders.
The exchange ratio implies a premium to Al Khaliji shareholders of 21.4% versus the share price before the board meeting announcement to discuss the merger (closing share price as of January 5, 2021) and 66.7% versus the share price before the announcement of the initial negotiations regarding a potential merger (closing share price as of June 30th 2020). The merger agreement is conditional on, amongst other things, obtaining regulatory approvals and upon the requisite resolutions being passed by the shareholders of Al Rayan and Al Khaliji.
Both entities will continue to operate independently until the effective date of the merger. HE Ali bin Ahmad al-Kuwari will become chairman and HE Sheikh Hamad bin Faisal bin Thani al-Thani will become vice chairman of the board of the merged entity. The executive committee of the board will be chaired by Sheikh Hamad.
The merger, which has the support of the board of directors of Al Rayan and Al Khaliji, will, once effected, create a larger and stronger financial institution with a strong financial position and significant liquidity available to support Qatar’s economic growth and to finance development initiatives in line with the Qatar National Vision 2030. Furthermore, it will create one of the largest Shariah-compliant banks in Qatar and in the Middle East with combined assets worth around QR172bn as of September 30, 2020.
The merger is also expected to contribute positively to the economic development in Qatar by supporting corporate businesses and small and medium sized entities, and will also create a strategic partner for the public sector. The merger will also combine the key strengths of the two banks in the areas of retail and private banking services, corporate and government institutions, capital markets, and wealth and asset management, giving the combined business both an excellent proposition for customers and stability through diversification for shareholders.
The merger will create significant scope for achieving cost efficiencies in the coming years and is expected to unlock cost synergies in the region of 15% of the “combined 9M’20 annualised cost base”, after integration is completed, driven by increased scale and annual efficiency gains. “There is also potential for revenue synergies between the two banks,” a joint statement on Thursday said.
Al-Kuwari, chairman, Al Rayan, said, “This is a landmark transaction that will contribute to the State of Qatar’s economic growth, vision and ambitions and is a testament to our commitment to creating a more robust Qatari banking system. The combined entity will create an even stronger institution that will aim to create value for our customers and shareholders.” Sheikh Hamad, chairman, Al Khaliji, said, “The combination of both banks will create increased scale, capacity and efficiency to allow us to support our diverse customer base and drive the enhancement of our product offering across the board. We are confident that this transaction will contribute to the development of the economy as a whole.”
The management teams of both banks will shortly be setting up a committee to develop a detailed integration plan and will use appropriate resources to execute upon the identified and desired revenue and cost synergies, which will provide added value to shareholders and customers of the two banks and the national economy. JP Morgan is acting as financial adviser to Al Rayan and Al Khaliji in their role as members of the steering committee in connection with the Merger. K&L Gates and KPMG are acting as legal and transaction advisers to Al Rayan, respectively.—Gulf News
