Qatar National Bank has reached an agreement with Société Générale to acquire the French lender's Egyptian operations, in a deal worth US$2billion (Dh7.34bn).
Qatar's biggest lender will then submit a mandatory tender offer to take full control of National Société Générale Bank (NSGB), valuing the bank at $2.5bn - below its market capitalisation. The Egyptian bank's shares plummeted on news of the deal.
The deal will result in a net gain of about €350 million (Dh1.68bn) for SocGen, said the French bank .
If regulatory approval is secured, the deal will mark QNB's fourth major acquisition this year, following expansions into Iraq, Libya, and more investment into the UAE.
"This transaction is in line with QNB Group's international strategy, which has become an integral part of our growth and commitment to diversify revenue sources," said Ali Shareef Al Emadi, the bank's chief executive.
"The Egyptian financial sector represents a significant growth opportunity with its combination of growth potential, increased future penetration of banking services, young and dynamic population to be served and the core links of Egypt within the Middle East and North Africa."
The deal is expected to close during the first half of next year.
NSGB shares fell 10 per cent in trading in Cairo yesterday, triggering a trading suspension.
QNB faced numerous short-term risks in executing the deal, not least of which is about $1bn of goodwill implied as part of the transaction, said one financial analyst, who asked not to be identified.
"Egypt is a populous country, one that has the potential to transform the QNB balance sheet, but it's going to be a long-term initiative," the analyst said.
QNB has been on an acquisition spree this year, initially targeting DenizBank, the Turkish arm of stricken Franco-Belgian lender Dexia. However, the Qatari bank walked away from the deal after it was outbid by Russia's Sberbank.
QNB instead took a 49 per cent stake in Bank of Commerce & Development, a Libyan private sector lender, and a 51 per cent stake in Iraq's Mansour Bank.
The bank also increased its stake in Dubai-based Commercial Bank International in September from 23.8 per cent to 40 per cent.
QNB's Doha-listed shares rose 0.9 per cent yesterday to 131.4 Qatari riyals, the bank's biggest intraday gains in three months, while SocGen shares were flat at €29.50 each in midday trading.
SocGen joins a number of European banks that have sold assets in an effort to bolster capital ratios to meet the stringent new capital requirements known as Basel III. BNP Paribas and Credit Agricole are also seeking to sell some of their Egypt operations.
"This acquisition completes our Egypt expansion plans. We are not looking at BNP or Crédit Agricole assets," QNB's chief financial officer Ramzi Mari said yesterday.
Despite the string of acquisitions making QNB the region's biggest bank by total assets, the bank's expansion drive was not yet complete, Mr Mari added.
"We are looking at a majority stake in a top 10 Turkish bank as a means to add value," he said.
Another acquisition was unlikely to be imminent in the near-term given the large number of expansions that QNB has undertaken this year, said Mahin Dissanayake, the director of financial institution ratings at Fitch Ratings.
"There's a lot of things happening on their counter," he said.
"They're trying to grow the network and convert overseas acquisitions into QNB-branded operations."
Based on guidance from the bank, Mr Dissanayake said it was unlikely that the bank's strongest Tier 1 capital would be affected by the NSGB acquisition. "It's in line with expectations, even with dividend payouts remaining at previous years' levels," he added.
