DUBAI (Reuters) – Dubai moved to create the Gulf’s largest bank by assets on Thursday with the merger of Emirates Bank International Ltd. and its smaller rival, National Bank of Dubai, in an $11.3 billion deal.
The combined bank, called Emirates NDB PJSC, created at the behest of Dubai’s ruler, will have about a fifth of total assets, loans and deposits in the United Arab Emirates, the world’s sixth largest oil exporter.
Shareholders in National Bank will own 33.7 percent of the new entity and Emirates Bank shareholders the rest, the banks said in a statement. Emirates Bank chairman Ahmed al-Tayer will be chairman of the new bank and Emirates Bank chief executive Rick Pudner its CEO, they said.
The banks said in March they had been asked to merge by Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum to form a lender large enough to meet the demands of a rapidly growing economy.
The two banks, which first attempted a merger in 1999, will top the market value of National Bank of Abu Dhabi , until now the largest in the United Arab Emirates.
They had assets worth $45 billion allowing the new entity to surpass Saudi Arabia’s National Commercial Bank as the Gulf’s largest lender by assets.
The deal values National Bank shares at 8.84 dirhams
($2.41), which compares with their last traded price of 9.15 dirhams on July 1, after which trading in shares of both lenders was suspended.
Shares in Emirates Bank, Dubai’s second largest bank by market value, are valued at 9.30 dirhams under the terms of the deal, on a par with their last traded price.
Trading the share would resume on July 15, the stock exchange said.
The government of Dubai, part of the United Arab Emirates federation, owns 76 percent of Emirates Bank and 14 percent of National Bank, Dubai’s fourth-largest by market value.
The two banks will initially be two legal entities, operating as subsidiaries of Emirates NBD. Within 18 to 24 months, the banks will be fully integrated, Pudner told reporters in a conference call.
“This is a true merger, it is a merger of equals. It is not a takeover,” Pudner said, pointing out that the board of the new bank would have six members from each lender, including National Bank’s Chief Executive Douglas Dowie.
The integration will save 151 million dirhams a year in costs by 2010, Pudner said.
“The majority of cost synergies will come from areas like retail banking,” he said.
The cost savings were higher than the 90 million dirhams EFG-Hermes had estimated, Raj Madha, a senior research analyst with the Egyptian investment bank, said.
“The overall synergies are much bigger than we expected, although we thought National Bank shareholders would get more for their shares,” Madha said.
The banks said National Bank shareholders would get a premium of 14 percent to the last trading price before the merger was first announced in March.
Shareholders of both lenders must approve the merger plan before it takes effect.