Arab News, Wed, Jun 26, 2024 | Dhu al-Hijjah 20, 1445
Bahrain’s NBB hires Goldman Sachs to explore merger worth $2.43bn
Bahrain:
Bahrain’s national bank appointed Goldman
Sachs as a financial adviser for its negotiation with top banking institutions
regarding a potential merger deal between the two, a disclosure showed.
According to a statement by the body on the
country’s stock exchange, National Bank of Bahrain – which currently holds a
market capitalization of $3.25 billion – is in the process of appointing an
advisor to conduct due studies and diligence related to its merger with rival
Bank of Bahrain and Kuwait, known as BBK, which has a valuation of $2.43
billion.
The potential deal coincides with the recent surge
of mergers and acquisitions in the region, where businesses and financial
institutions within the Gulf Cooperation Council have increasingly favored
pooling their resources to achieve operational efficiency and maximize profits.
In Saudi Arabia, for example, the total volume of
mergers and acquisitions deals during the first quarter of 2024 reached $955
million, with the chemicals sector accounting for 52.4 percent of the total.
NBB also appointed Freshfields Bruckhaus
Deringer, a leading international law firm, as a legal advisor for the deal,
according to the disclosure while BBK announced the selection of Citigroup
Global Markets as its financial advisor.
This continues a trend in the region’s banking
sector. Last year, Oman’s second-largest financial institute, Bank Dhofar,
pursued a merger with its smaller rival, Ahli United Bank, creating a lender
with just under $20 billion in assets.
These deals come as a testament to global rating
agency Moody’s expectation in March of last year that banks in the GCC region
will witness a rise in M&A activity, enabling future synergies and oil revenue
divergences in the area.
“Consolidation among GCC region banks brings scale
to support the diversification of Gulf economies away from oil and benefits in
revenue and cost synergies,” said Francesca Paolino, an analyst at Moody’s.
The rating agency noted that this development
would occur despite the region’s pre-existing strong bank financial fundamentals
and modest over-banking level.
It also said that the majority of Middle East M&A
activities were concentrated in Saudi Arabia, the UAE, and Egypt, which
collectively recorded 563 deals or 89 percent of the region’s total volume.