France's Credit Agricole has agreed to sell about half its 31.1 percent stake in Banque Saudi Fransi (BSF) to billionaire Prince Alwaleed Bin Talal's Kingdom Holding for 5.76 billion riyals ($1.54 billion). 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 J.P. Morgan 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 percent of the bank and Credit Agricole would retain 14.9 percent. It said Credit Agricole could sell a further 5 percent 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 percent 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 percent stake in BSF would lift its fully-loaded common equity tier 1 (CET1) ratio for Cr?dit Agricole S.A. by about 20 basis points and its fully-loaded CET1 ratio of Cr?dit 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 percent to 11.06 riyals, while Banque Saudi Fransi shares were down 2.7 percent at 32.10 riyals, after closing at 33 riyals on Monday. At a deal price of 29.5 riyals 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.
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