Yesterday, the board of directors of MCB Bank and NIB Bank in their separate meetings decided to merge the financial institutions through a share swap agreement between shareholders and owners of both banks. According to the terms of the agreement, MCB will acquire a majority stakes in NIB, which includes clients, assets and operations, in a bid to form a merged bank.
“The committee of the board of directors of MCB, at its meeting, approved and recommended the scheme of amalgamation of NIB with and into MCB by way of merger of NIB with and into MCB through a share swap arrangement,” the MCB said in a notice issued to the Pakistan Stock Exchange.
This means that shareholders of NIB Bank will automatically have stakes in MCB Bank along with representation at the board level. To be more specific, rather than acquiring NIB with an outright purchase, MCB will merge operations with NIB in order to have precise share of losses and profits
“The committee has also approved the swap ratio of one new ordinary share of MCB for every 140.043 shares of NIB for the scheme of amalgamation.” Also, it is worth mentioning that the merger is subject to approval from the State Bank of Pakistan (SBP), shareholders as well as Competition Commission of Pakistan (CCP).
Moreover, as per the amalgamation agreement MCB will be issuing 73.6 million ordinary shares to NIB shareholders. According to a report published by Topline Research, the share value of NIB Bank comes at PKR 1.6 at a discount to book value of PKR 1.8 per share, based on the current market price of MCB Bank and swap ratio of 140. The shares of NIB Bank are currently trading at PKR 1.9 per share.
Many analysts believe that the amalgamation will prove to be extremely fruitful for MCB as its total deposit base will increase to PKR 887 Bn. Also, MCB branch network will increase by 171 to 1,395 branches across the country.