MCB approves NIB Bank’s swap ration merger

KARACHI: The board of MCB Bank approved the bank’s merger into NIB Bank at a share swap ratio, which was vehemently opposed by the minority shareholders of the latter’s financial institution.   

“The shareholders of MCB at their extra-ordinary general meeting, held on 23 January, have unanimously approved and adopted the scheme of amalgamation of NIB Bank Limited with and into MCB… through a share swap arrangement,” said MCB, in a notice issued to the Pakistan Stock Exchange on Tuesday.

“The shareholders of MCB have also unanimously approved the swap ratio of one new ordinary share of MCB Bank for every 140.043 shares of NIB for the scheme of amalgamation. 

The bourse filing said the decision of the shareholders of MCB are subject to, amongst others, sanction of the State Bank of Pakistan, approval of the Competition Commission of Pakistan and receipt of other requisite regulatory authorisations, consents and approvals.

As a consequence of the approved amalgamation, 73,569,197 ordinary shares of MCB would be issued in favour of the shareholders of the NIB Bank.  Minority shareholders group of NIB Bank rejected the existing swap arrangement. 

“The proposed swap ratio bears no relationship to the real value of NIB shares and if approved the merger will significantly deprive NIB shareholders of almost 30 percent value,” the group said in an appeal, published in media on January 22.  

“The proposed swap ratio values each share of NIB at approximately Rs1.58 whereas the book value of each NIB share is Rs1.84 and the market price of each NIB share was Rs2.21 on 6 December 2016, just a day before the announcement of the proposed merger.”

The group asked the shareholders of NIB Bank to reject the proposed swap ration and merger, “by writing their objections to the president of NIB Bank Limited, the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan and other forums.”

NIB’s board meeting is yet to take place to approve the amalgamation scheme. Sindh High Court issued a status quo order preventing the holding of extraordinary general meeting of NIB scheduled for 23 January.

Fullerton Fund Management Company Ltd, a subsidiary of Singaporean state investor Temasek Holdings, was trying to exit from Pakistan through divesting its majority stake in NIB Bank. It initiated divestment process in 2011. NIB sustained a net loss of around Rs17 billion since Temasek acquired the bank back in 2005.

Analysts said alone State Life Insurance Corporation and Pakistan Reinsurance, which together own 228 million shares of NIB Bank, would sustain a loss of Rs215 million on book and Rs139 million on market value on completion of ‘undervalued sale of NIB Bank’s stakes.’  In the past five years, MCB, the country’s third biggest lender, has been a laggard in branch expansion and has opened only 125 branches since 2010, showing a cumulative 11 percent growth in branch network. Acquisition of NIB offers MCB a chance to grow its network by 14 percent, analysts said.

 For NIB Bank, the country’s 12th largest bank by market capitalisation, the possible merger could be a great chance to get out of losses. The bank was struggling to be profitable, and it posted profit after tax of Rs2.617 billion in 2015 as against loss after tax of Rs508 million in the year 2014.

Published in The News, January 25th, 2017