Dubai: Emirates NBD said on Tuesday it has entered into a definitive agreement to buy 99.85 per cent stake in Denizbank from Sberbank for 14.6 billion Turkish Lira ($3.2 billion), in a Dubai-based bank’s largest overseas acquisition, boosting its shares by 8 per cent.

Emirates NBD will pay interest on the consideration for the period between October 31 and the transaction closing date. All profits from the locked period will be on Emirates NBD’s account, along with subordinated debt of Denizbank previously provided by Sberbank, the bank said in an emailed statement.

“Through this transaction, Emirates NBD will establish itself as a leading bank in the Middle East, North Africa and Turkey (MENAT) region and achieve meaningful diversification of its operations, both in new countries and in a broad range of business segments”, Hesham Abdulla Al Qassim, Vice Chairman and Managing Director, Emirates NBD said.

The price to book value multiple is 1.17x based on the book value as of October 2017 and expected to close at 1.05x-1.06x BV, said an official spokesperson at Emirates NBD to questions emailed by Gulf News.

Asked how the bank proposes to fund the acquisition the spokesperson said: “Over the years, Emirates NBD has built-up its capital base and is adequately capitalized to consolidate Denizbank. So we expect this deal to be funded through in house resources.”

The board had earlier approved to raise upto $2 billion of Tier 1 capital for general banking purposes and to ensure sufficient buffer to fund future growth.

“We have a very liquid balance sheet and such transaction settlement is well within our means,” the spokesperson said.

The acquisition is expected to enhance the global aspiration of the bank. Emirates NBD previously bought BNP Paribas’ unit in Egypt, and also opened a branch in Mumbai last year, its fifth international branch outside the UAE.

“Turkey has a fast growing banking market with a large and young population which provides additional growth avenues for Emirates NBD.

The acquisition will also meet our objective of achieving a meaningful diversification of revenues and assets outside UAE, in a country that is a net oil importer,” the spokesperson added.

Shareholders

The transaction is expected to close in 2018 and is expected to be accretive to shareholders in the first year.

Shares of Emirates NBD recieved a boost while those of Denizbank and Sberbank were in the negative. Emirates NBD closed 8.41 per cent higher to Dh 10.70, and was the most actively traded stock on the Dubai Financial Market. Emirates NBD contributed to nearly 15 per cent of the total traded value.

“Market is awaiting more clarity on FOL (Foreign Ownership Limit) from 5-20 per cent pending regulatory approvals, which could re-rate the stock from current levels. Further catalyst will come from a most likely inclusion of ENBD in FTSE and MSCI early next year.,” Aarthi Chandrasekaran, Vice President at Shuaa Capital told Gulf News.

Sberbank, which is 50 per cent owned by the Russian government, had bought 99.85 per cent stake in Denizbank for $3.6 billion in September 2012, before the US and European sanctions kicked in 2014.

“Denizbank is one of the most attractive assets in the Turkish banking sector. The decision to sell Denizbank is prompted by a change in Sberbank Group’s international strategy and will allow us to focus further on development of ecosystem of Sberbank,” Herman Gref, chief executive officer of Sberbank said in a statement posted on its website.

Shares of Denizbank, which posted a net profit of 2.26 billion Turkish Lira in 2017, closed 13 per cent lower to 6.90 Turkish Lira, while Sberbank shares fell more than 1 per cent to 223.86 roubles.