Qatar Banks Agree to $2.2 Billion Deal to Leapfrog Larger Rivals

(Bloomberg) --

Masraf Al Rayan QSC agreed to buy Al Khalij Commercial Bank PQSC in a share-swap deal that will create Qatar’s second-largest lender in the Middle East’s first takeover of the year.

Masraf Al Rayan will pay a 21% premium to Al Khalij’s closing share on Tuesday, and will issue 0.5 securities for every Al Khalij share, the lenders said in a statement on Thursday. The deal is valued at 8.2 billion riyals ($2.2 billion), according to Bloomberg data.

Taking over smaller rival Al Khalij will see Masraf Al Rayan leapfrog its next two largest competitors by giving it $47 billion in assets -- still six times less than that of Qatar National Bank QPSC. Qatar has 2.5 million people being served by about 20 local and international banks, leaving smaller lenders at a disadvantage unless they can find a niche or competitive edge.

The combination will “create a larger and stronger financial institution with a strong financial position and significant liquidity available to support Qatar’s economic growth,” the lenders said. The merger will also result in cost savings and revenue synergies.

Ali Bin Ahmad Al Kuwari will become chairman and Sheikh Hamad Bin Faisal Bin Thani Al-Thani will become vice chairman of merged entity. The executive committee of the board will be chaired by Sheikh Hamad Bin Faisal Bin Thani Al-Thani.

Shares of Masraf Al Rayan gained 1.2% by the close on Thursday, while Al Khalij’s stock rose 2.8%.

Masraf Al Rayan and Al Khalij started talks in June last year amid a wave of bank consolidations in the Gulf’s financial industry. Lenders are seeking to build scale to cope with the fallout of lower oil prices and the economic havoc caused by the coronavirus pandemic.

The spate of large transactions has helped consolidate a fragmented industry. Saudi Arabia’s largest lender, National Commercial Bank, last year bought Samba Financial Group for $15 billion in one of the biggest banking takeovers of 2020.

JPMorgan Chase & Co. is financial adviser to Al Rayan and Al Khalij.