Emirates NBD will buy 99.9 percent of Denizbank AS for 14.6 billion lira ($3.2 billion) and take on subordinated debt.
Dubai’s biggest bank agreed to buy a Sberbank PJSC unit in Turkey’s biggest takeover deal since 2012. Emirates NBD PJSC shares climbed in Dubai.
Emirates NBD will buy 99.9 percent of Denizbank AS for 14.6 billion lira ($3.2 billion) and take on subordinated debt, according to a statement Tuesday. The Dubai state-controlled lender will also pay interest on the deal amount from Oct. 31 and receive all of Denizbank’s profit from that date in a so-called locked box agreement.
Gulf lenders are expanding in markets like Turkey with acquisitions and license applications as they face limited expansion opportunities at home. Qatar National Bank bought National Bank of Greece SA’s Turkish unit in 2016, paying slightly below book value. Commercial Bank of Qatar took full ownership of Alternatifbank AS the same year.
“Although the Turkish economy outlook is entering into a challenging phase, the timing of the acquisition is in favor of Emirates NBD due to a drop of Turkish lira,” said Tariq Qaqish, managing director of the asset-management division at Mena Corp. Financial Services LLC in Dubai.
Emirates NBD shares climbed as much as 8.4 percent, the most in more than two months, to 10.70 dirhams in Dubai. The shares have advanced 29 percent this year compared with a 12 percent decline for the benchmark index.
A slowdown in Turkey’s $851 billion economy, a weakening lira and a series of debt restructurings are clouding the outlook for the country’s banking sector. Banks have also come under pressure from the President Recep Tayyip Erdogan who is pushing lenders to give up some of their profits, cut loan rates and boost lending.
For Sberbank, the acquisition of Denizbank for 6.9 billion lira in 2012 was its largest ever. The sale marks a further retreat of the lender’s international ambitions after it was hit with U.S. and European Union sanctions in 2014, in response to Russia’s role in the Ukraine crisis.
The acquisition, the biggest for Emirates NBD, will add about $37 billion to its assets. It is Emirates NBD’s second major overseas acquisition. In 2013, it bought BNP Paribas SA’s Egyptian unit for $500 million.
The deal was agreed at 1.17 times book value at the end of October, although that multiple is expected to decline to about 1.05 to 1.06 times book value after including profit since then and subtracting interest payments, Emirates NBD said in response to questions from Bloomberg News. Approvals for the deal, which will be funded from internal cash, are expected over the next five to six months.
“The transaction represents a significant milestone for Emirates NBD and is expected to be accretive to shareholders in the first year,” Chief Executive Officer Shayne Nelson said in the statement.
Clifford Chance LLP were the legal advisers and Deloitte LLP helped with financial diligence, Emirates NBD said. McKinsey & Co. advised on local commercial diligence.
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