BankDhofar, Bank Sohar agree on merger share swap ratio

Muscat: Bank Dhofar and Bank Sohar have reached a swap ratio of one share of BankDhofar in exchange of 1.29 shares of Bank Sohar for merging both financial institutions.
The boards of both banks have agreed for the swap ratio for the proposed merger, which has been pending for the last three years.
If everything goes well, the merger will create one of the biggest banks in Oman.“All other terms and conditions of the proposed merger will be agreed upon and documented in a merger agreement to be entered into by both banks, subject to regulatory and shareholders approvals,” statedboth banks in separate disclosure statements posted on MSM website.
“The share swap ratio is almost in line with our expectations,” said Joice Mathew, head of research at United Securities.
“It (the merged entity) will be the second leading bank in Oman in terms of asset, profitability, loan book and branch network,” added Mathew. Bank Dhofar has 63 conventional banking offices/branches, while Bank Sohar has another 26 operating branches for conventional banking by end-December 2015, according to the latest quarterly report published by the Central Bank of Oman (CBO). In addition, Bank Dhofar has five Islamic windows in operation, while Bank Sohar has four Islamic windows in operation.
Bank Sohar shares surged ahead by 3.41 per cent to 182 baisas, amid 11.99 million shares changing hand on the Muscat bourse. Similarly, Bank Sohar bond also rose by 10 per cent to 110 baisas.
Mathew also said that the merger is a positive development in the financial sector. “We are getting a highly capitalised bank, which will create strong syndication initiatives and single party lending limit will go up in the case of merged entity.”
S Suresh Kumar, head of research at Al Maha Financial Services, said that there are too many players in the market, which is causingsevere competition. “So, consolidation will help banks to improve their operating efficiencies and value-added offerings to customers,” added Suresh Kumar.
“Finally, after three years of negotiations, the merger of both the banks is expected to be finalised during the coming months subject to regulatory and shareholders’ approval,” noted Gulf Baader Capital Markets in a research note.
Bank Sohar’s acting chief executive officer and general manager, Rashad Ali Al Musafir, resigned earlier this month on personal reasons, according to a statement posted on the stock exchange website earlier.