The merger of the Commercial Bank of Abu Dhabi, the National Union and Al Hilal Bank



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The banking sector in the UAE is expected to witness the birth of a new banking group with strong potential and broad scope after the Commercial Bank of Abu Dhabi and the Union National Bank agreed to merge the two banking institutions.

The transaction, which was unanimously recommended to shareholders for approval by the board of directors and shareholders, is expected to be approved in the coming weeks.

The new banking group will have the identity of Abu Dhabi Commercial Bank and will continue to benefit from strong institutional support through ownership of the Abu Dhabi government through the Abu Dhabi Investment Council. Al Hilal Bank will maintain its current name and brand and operate as a separate Islamic banking unit within the new group.

ADCB will consolidate its position as the UAE's third largest financial institution and will become GCC's fifth largest banking institution with total assets of AED 420 billion ($ 114 billion). The new bank's customer base is expected to reach about 1 million and its market share in the UAE will be September 30, 2018:

  • 15% of total assets portfolio
  • 21% of total loans to clients
  • 16% of total bank deposits.

The transaction will create an ideal platform to support the growth of the Bank's business in the retail and corporate sectors, both traditional and Islamic. The strategic objective of the new bank will be to increase its market share, prioritizing excellence in customer service and continuing to innovate in the development of its products and services, mainly through its digital bank channels.

The new bank will aim to capitalize on its strong business potential, increase its ability to finance and support business and contribute to the growth and economic diversification of the UAE, as well as investments in human and technical resources and infrastructure.

Structure of the transaction

The proposed transaction between the ADCB and the Union National Bank will be carried out by means of a legal merger.

Under the merger between ADCB and Union National Bank, new shares will be issued to ADCB shareholders at a rate of 0.5966 shares in the ADCB for each share they hold at UNB, a total of 1,641,546,697 new shares to be issued to the Bank's shareholders . National Union. The swap rate, in addition to the stockholders of UNB, is 0.6% based on the closing prices of the shares in the last trading session (January 28, 2019) and foresees a premium of 13.7% based on the average prices of prior to the announcement of the transaction.

On the day the transaction enters into force, the listing of Union National Bank shares will be excluded from the Abu Dhabi Stock Exchange, while the bank resulting from the merger will maintain the legal registration of the ADCB.

The merged entity of ADCB and Union National Bank will acquire Al Hilal Bank for AED 1 billion through the issuance of mandatory convertible financial instruments which may be converted into 117,647,058 shares in the Abu Dhabi Commercial Bank to the Abu Dhabi Investment Council. Legal status.

The three banks will continue to operate independently until the merger comes into force and is expected to begin in the first half of 2019. The merger is subject to obtaining the necessary approvals from shareholders and regulators, including the Central Bank of the United Arab Emirates. The transaction requires a minimum of 75% of the value of the shares offered at AGA in the full quorum of ADCB and Union National Bank.

Upon completion of the merger between the ADCB and Union National Bank and the acquisition of the merged entity by Al Hilal Bank, the Abu Dhabi Investment Authority will represent 60.2% of the bank resulting from the merger, while the other shareholders of the ADCB will account for 28.0%. And other shareholders in the National Bank represent 11.8%.

Mr. Essa Mohammed Al Suwaidi will be the Chairman of the Board of the new banking group and Mr. Mohammed Dhaen Al Hamli as Vice Chairman, while Mr. Alaa Erekat will be the Executive Director of the new banking group. The Board of Directors and the Executive Board of the bank resulting from the merger will designate the new positions when the transaction enters into force.

Mohammed Al Suwaidi, Chairman and President of Abu Dhabi Commercial Bank, said: "This merger is a very important business for the UAE economy and will result in the creation of a larger, stronger and more flexible banking group that will contribute significantly to our objectives and to enable it to play an active role in supporting the continued growth and prosperity of the UAE and to help lay the foundations for building a dynamically linked to the world's leading economies.Lal and Lal business networks, through investment and commercial flows. "

"Following this transaction, the ADCB will have the scale and knowledge to play a key role in supporting the next phase of UAE economic development and leveraging previous successes to create a stronger banking institution focused on delivering the best performance possible and provide an experience The Bank will continue to raise the standards of the banking sector in the UAE and contribute to supporting the development of Abu Dhabi as a global financial and business center. "

"I take this opportunity to express our deep gratitude and gratitude to His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the United Arab Emirates, Ruler of the Emirate of Abu Dhabi and His Highness Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Sheikh Mohammed bin Zayed Al Nahyan, Deputy Prime Minister and Minister for Presidential Affairs and the Central Bank of the United Arab Emirates for their continued support for ADCB and their sincere efforts to develop and develop the economy of the United Arab Emirates. UAE. "

"This transaction represents a milestone and a confident step towards establishing a new financial institution with greater potential and greater flexibility and a proven record of success in the traditional and Islamic banking sectors," said Alaa Erekat, executive director of the Banco Comercial Abu Group Dhabi and board member and chief executive officer. The new banking group will focus on seizing the business opportunities available in the United Arab Emirates as part of its growth strategy, which is focused on meeting the needs of its clients and enhancing their experience. With a well-attended international presence, the scope and efficiency of the new bank will further increase its investment potential, develop its human services and efficiencies to increase its market share and further support our operations with stronger standards of good governance, compliance and risk management. To play its important role as one of the engines of stability and economic growth in the state ".

"Abu Dhabi Commercial Bank has the potential to contribute to the UAE's economic vision and actively participate in driving economic growth and diversification, and we look forward to creating a more prosperous banking institution capable of growing in a rapidly evolving economic environment. we work to achieve sustainable value for customers, employees, investors and the community in which we operate, "he added.

Transaction Methodology

Strategic dimension

The proposed merger will be a leading banking institution that will play a key role in the UAE economic landscape, backed by a strong balance sheet that will put it in a position that will enhance its ability to meet the challenges that the global economy can bring.

Improving productivity and achieving economies on a large scale will contribute to improving the Bank's profitability and thereby increasing the competitiveness within its portfolio of products and services for individual and institutional clients, including both conventional and Islamic banking solutions.

The agreement will further expand customer financing and quickly create the ability to invest in future growth mechanisms such as compliance, digital switching, electronic security and a sophisticated branch network.

The three banks have recorded steady growth over the last ten years, reaching a cumulative increase in the customer and asset base. This transaction will help improve cost efficiency in the coming years. The transaction cost reduction is expected to be AED 615 million (US $ 167 million) per annum, based on the average cost of operations, equivalent to about 13% of the combined cost base of the three banks, which varies between 8% and 10%. It is expected that these benefits will be realized in two or three years.

In addition, the transaction has significant potential to add value to shareholders. It is expected that an increase in the net worth of the three banks will be in a stable position and that the bank resulting from the merger will record a positive return on equity and assets.

Financial benefits of the merger transaction

The bank resulting from the merger will benefit from a strong balance sheet and sound financial performance standards with better access to the capital markets.
The new bank's financial position will meet regulatory standards in accordance with the Basel III Capital Accord.

The bank's consolidated financing structure resulting from the merger will be diversified, with a projection of 75% of total deposits, including a strong and low-cost base for current accounts and savings accounts of AED 96 billion, corporate finance of 18%. On September 30, 2018. The new bank will also have a good ratio of net loans to deposits assumed at 96.5% on September 30, 2018.

The Bank's profitability standards will remain strong, with a cost-benefit ratio of 36.0% as of September 30, 2018, with significant potential to capitalize on significant cost cutting opportunities and an expected rate of return on average equity . The net interest margin assumed by the bank resulting from the merger will be 3.0% 5.

Strategic Priorities

The bank will have a diversified base of products and customers, with corporate and corporate loans accounting for 75% of the Bank's total credit portfolio and 25% of loans to customers will be made on September 30, 2018.

The new bank will benefit from the new opportunities created by the United Arab Emirates' diversified economy, thereby increasing its market position, providing the best customer experience.

Retail Banking Group, the second largest retail service provider in the United Arab Emirates, will offer a broad range of premium banking products and services, backed by a successful customer satisfaction policy and exclusive banking service through channels the Bank. And through its extensive network of agencies.

The new banking group will be the third largest Islamic bank in the United Arab Emirates, with a market share of 13%, while its clients will benefit from a range of Sharia-compatible products and services.

With a larger and stronger budget, the merged bank can expand its services by providing financing solutions to large and growing corporate clients. Integrating the customer base of leading institutions and SMEs in the three banks will open up new opportunities for the new bank, provide comprehensive financial services and expand relationships through advanced products ranging from structured financial solutions to banking services, treasury services and investments. The merged bank will be based on a sophisticated cash management platform that will increase its ability to attract savings accounts and checking accounts.

Good governance will be a key factor in creating sustainable value for all stakeholders. The Bank will continue to operate in accordance with a disciplined methodology for risk management, price change, exhibition management and concentration in bank finance. management will focus on rigorous compliance with the banking industry's best global practices.

The merged bank will provide promising opportunities for the growth of its team in an encouraging environment based primarily on the motivation and reward of employees who put their clients' interests at the top of their priorities.

The transaction will support the expansion of investment in capacity building and skills development programs and the development of a highly diversified employee base. The Bank will also contribute to the position of the UAE as a leading financial center, encouraging UAE citizens to enter the financial services and help them acquire the training and education they need to achieve career advancement.

Provisions for the merger operation

The merger between ADCB and UNB will be carried out under the provisions of Federal Law No. 2 of 2015 on Commercial Companies (Business Law). Upon completion of the merger, the merger will be transferred to ADCB for the issuance of new shares of ADCB to the shareholders of Union National Bank. At the effective date of the merger, UNB shareholders will become shareholders of ADCB and UNB shares will be withdrawn from trading on the Abu Dhabi Stock Exchange.

Under the merger between ADCB and Union National Bank, new shares will be issued to ADCB shareholders at a rate of 0.5966 shares in the ADCB for each share they hold at UNB, a total of 1,641,546,697 new shares to be issued to the Bank's shareholders . National Union. The swap rate, in addition to the stockholders of UNB, is 0.6% based on the closing prices of the shares in the last trading session (January 28, 2019) and foresees a premium of 13.7% based on the average prices of prior to the announcement of the transaction.

The resulting merger of ADCB and Union National Bank will acquire Al Hilal Bank for AED 1 billion through the issuance of compulsory convertible financial instruments that may be converted into 117,647,058 ADCB shares for the Abu Dhabi Investment Council after the completion of the merger. Legal status.

Upon completion of the merger between the ADCB and the Union National Bank and the acquisition of the merged entity by Al Hilal Bank, the Abu Dhabi Investment Authority will represent 60.2% of the bank resulting from the merger, while the other shareholders of the ADCB will account for 28.0%. And other shareholders in the National Bank represent 11.8%.

Conditions for the merger transaction and procedures to be followed by the shareholders:

In addition to other conditions, the merger between ADCB and UNB is subject to the following conditions, which have been fulfilled (or when applicable or exempted):
1. Issue a decision approving the merger between the ADCB and the National Bank of the Union and certain issues related to the shareholders who are entitled to vote at the general meetings of ADCB and UNB respectively,
2. Obtain all necessary approvals for the merger, which have been identified by the Boards of Directors of ADCB and UNB (including obtaining approvals from the UAE Central Bank and other regulators);
3. All conditions relating to the completion of the acquisition of Al Hilal Bank are fulfilled or waived (except for the conditions for issuing the SCA certificate for the ADCB merger).

Further details of the general meeting of the ADCB and the National Bank of the Union will be sent to the shareholders of ADCB and UNB at the appropriate time in the shareholders' bulletin to be issued in conjunction with the transaction.

Following the above conditions for the merger between ADCB and UNB, the Board of Directors of Banco Comercial de Abu Dhabi and the National Bank will apply to the Securities and Exchange Authority (SCA) for approval of the merger, the necessary steps to implement the merger, Abu Dhabi Commercial Bank, and make the necessary amendments to the Regulations of the Commercial Bank of Abu Dhabi (SCA). Under these conditions, the merger between ADCB and UNB is expected to enter into force in the first half of 2019. The date is an indicative and modifiable date.

In addition to other conditions, the acquisition by Banco Al Hilal of the Bank is subject to the following conditions that have been met (or canceled):
1. Obtain all necessary approvals for the acquisition, identified by the Board of Directors of ADCB and Banco Al Hilal (including obtaining approvals from the UAE Central Bank and other regulators);
2. Issue an accreditation certificate from the Securities and Commodities Authority.

Upon completion of these conditions, the acquisition of Al Hilal Bank shall enter into force upon completion of the merger between ADCB and Union National Bank. The date is indicative and modifiable.

Counselors

Barclays, Allen & Afri LLP and KPMG were appointed as financial advisors, legal advisors and accounting consultants at ADCB, respectively.
JPMorgan, Clifford Chance and Ernst & Young were appointed as financial advisors, legal advisors and accounting consultants at the Union National Bank, respectively.
He was appointed Legal Adviser and Deloitte as an accounting consultant to Al Hilal Bank.
For all details of the merger, investors should consult the shareholders' bulletin that will be issued in due course.

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