Alwaleed to Buy 16% of Saudi Fransi
Credit Agricole SA is selling half its stake in Banque Saudi Fransi to billionaire Prince Alwaleed bin Talal at a discount, Bloomberg reported.
Alwaleed will buy 16.2 per cent of Banque Saudi Fransi from the French lender through his Kingdom Holding Co. in a deal valued at $1.54 billion, according to a statement on the Saudi stock exchange September 12, 2017. The price of 29.5 riyals (AED 28.9) a share is an 11 per cent mark down to Monday’s closing price. Credit Agricole initially tried to sell its entire 31 per cent stake in Fransi as it refocused on it main markets, people familiar with the matter said in March.
International banks are grappling with how to approach the Middle East’s biggest economy, which blocks foreign control of local lenders. Some are positioning themselves for what’s expected to be a fee bonanza as the kingdom overhauls its economy and plans to list Saudi Arabian Oil Co. in what could be the largest-ever initial public offering.
Others are trying to exit. Royal Bank of Scotland Plc has been reportedly trying to sell its 40 per cent stake in Alawwal for almost a decade, and is now in talks to merge the business with HSBC Holdings Plc’s Saudi British Bank.
“We expect to see local buyers or other local banks taking over stakes of foreign investors, looking to exit their position in Saudi banks,” said Chiradeep Ghosh, an analyst at Securities & Investment Co. in Bahrain.
“The foreign ownership cap is a deterrent to international banks who prefer to hold majority stakes.”
Still, interest in Saudi Arabia among the world’s major finance companies remains strong. Mitsubishi UFJ Financial Group Inc. is looking to hire in the kingdom as seeks to benefit from privatizations valued at more than $350bn over the next five years. In April, Citigroup Inc. received an investment banking license to operate in the country after 13 years.
Alwaleed will become Saudi Fransi’s largest investor once the deal closes, adding to an extensive portfolio that includes a Citigroup stake which the prince has held since 1991. Kingdom Holding, in which Alwaleed owns 95 per cent, is also an investor in News Corp., Twitter Inc., JD.com Inc., the Four Seasons hotel chain and Accor Hotels.
“Our investment in Banque Saudi Fransi demonstrates our core belief in the outlook for the Saudi economy,” Alwaleed said in a statement.
The deal is part of Kingdom Holding’s efforts to increase its recurring cash flow and profitability, said Chief Financial Officer Mohamed Fahmy.
For Credit Agricole, the disposal will lift its common equity Tier 1 ratio by about 20 basis points, the Paris-based bank said in a statement. The lender’s corporate and investment bank has an option to sell an additional 5 per cent and is committed to keep a stake of at least 9.9 per cent for a year after the deal.
“This stake had a positive impact on P&L but was not strategic because there weren’t cross-selling opportunities” with the rest of Credit Agricole’s activities,” said Alex Koagne, an analyst at Natixis SA who has a buy rating on the stock.
Credit Agricole Corporate and Investment Banking aims to “remain a strategic partner” of Saudi Arabia, Jean-Yves Hocher, the head of the unit, said in the statement. Credit Agricole CIB wants to develop its businesses in the country and grow its “direct presence” there, he said.