France’s Credit Agricole has agreed to sell about half its 31.1 per cent stake in Banque Saudi Fransi (BSF) to billionaire Prince Alwaleed Bin Talal’s Kingdom Holding for SAR5.76bn ($1.54bn).
The sale was part of a wider review of Credit Agricole’s assets and markets to meet new banking rules and tougher economic conditions. Sources had said in March it picked JPMorgan to advise on a potential sale.
“We see it as positive but expected as it is part of management plan to clean up capital and overseas operations,” brokerage house Jeffries’ analysts said in a note.
BSF said after the deal was announced that Kingdom Holding would own 16.2 per cent of the bank and Credit Agricole would retain 14.9 percent. It said Credit Agricole could sell a further 5 per cent stake via off-market block trade deals.
“With Alwaleed becoming a majority owner of the bank, it is a sound long term strategic move which will ultimately benefit BSF,” Hesham Abou Jamee, chief executive of Alisthmar Capital, told Saudi-owned Al Arabiya TV.
Credit Agricole follows Royal Bank of Scotland (RBS) in seeking to sell its stake in a Saudi bank. RBS holds 40 per cent of Alawwal Bank, which is talks to merge with Saudi British Bank, partly owned by HSBC.
Credit Agricole said the sale of a 16.2 per cent stake in BSF would lift its fully-loaded common equity tier 1 (CET1) ratio for Crédit Agricole S.A. by about 20 basis points and its fully-loaded CET1 ratio of Crédit Agricole Group by 5 basis points.
The transaction, subject to regulatory approvals, is expected to close in the second half of this year and will be funded through Kingdom Holding’s available liquidity and existing bank facilities, Kingdom said in a statement.
Kingdom Holding shares rose 7.6 per cent to SAR11.06, while Banque Saudi Fransi shares were down 2.7 per cent at SAR32.10, after closing at SAR33 on Monday.
At a deal price of SAR29.5 per share, Kingdom Holding is buying the BSF stake at a discount to its current share price and book value of Saudi bank peers.
“It is not a very expensive acquisition,” said an analyst at a Gulf brokerage. “For Kingdom Holding, it is a really good deal. It is a clean bank and was quite conservative. Credit Agricole could have realized more but in this environment they got a buyer.”
The acquisition is expected to increase cash flow and income for Kingdom Holding. Credit Agricole remains a strategic shareholder and will support the bank’s activities, Kingdom Holding said.