Saudi British Bank picks Goldman for Alawwal merger

Saudi British Bank (SABB) has appointed US investment bank Goldman Sachs to advise on a proposed merger with fellow Saudi Arabian lender Alawwal Bank, sources familiar with the matter said.

SABB, which is 40 per cent owned by HSBC Holdings, and Alawwal said on April 25 they had agreed to start talks on a merger that could create the kingdom’s third biggest bank with assets of nearly $80bn.

SABB and Goldman Sachs declined to comment on Wednesday.

Alawwal, which is 40 per cent owned by Royal Bank of Scotland, has selected JPMorgan as its adviser on the deal, Reuters reported on May 29.

Goldman Sachs, which is seeking a licence to trade Saudi stocks, has worked on six merger and acquisition deals in the kingdom since 2007 prior to the bank merger, according to Thomson Reuters data.

Most recently it advised Rowan Companies in 2016 on the formation of a joint venture with Saudi Arabian state oil giant Saudi Aramco to own, operate and manage offshore drilling rigs in the country.

Although the time frame for the bank merger has yet to be agreed, one of the sources told Reuters on May 29 that the accounts of the two banks could be consolidated by the end of 2017, though the merger would take longer.

RBS has been trying sell its stake in Saudi Hollandi Bank, renamed Alawwal Bank in November, for several years and Reuters reported in November that it had hired Credit Suisse for the process. But restrictions on selling to a foreign buyer were one of the reasons why it failed then, sources said at the time.

Instead, a merger of Alawwal with a larger rival should allow it to sell its stake more easily, analysts say.

RBS and Alawwal have several common shareholders. Saudi’s Olayan family holds 21.76 per cent of Alawwal Bank and 16.98 per cent of SABB while the Saudi government owns 10.5 per cent of Alawwal Bank and 9.74 per cent of SABB, according to Thomson Reuters data.