• Larger and stronger bank with a robust financial position and liquidity
• Well-diversified business and customer portfolio with a distinctive product offering
• Stronger base to finance development initiatives in line with Qatar Vision 2030
• Combined entity underpinned by strong government support and ownership
• Superior shareholder value creation through realization of synergy potential
• Masraf Al Rayan’s legal entity to be retained by combined group

In a joint press release issued today, and following the announcement on 30 June 2020 of a potential merger (the “Merger”), Masraf Al Rayan (“Al Rayan”) and Al Khalij Commercial Bank (“Al Khaliji”) have announced that they have entered into a merger agreement on January 7th 2021 (the “Merger Agreement”). Following the Merger, Al Khaliji's business will be absorbed into Al Rayan's business, and Al Rayan will be the remaining legal entity, which will continue to operate in accordance with Islamic Shari’ah principles.

TRANSACTION STRUCTURE AND PRICING

The proposed Merger between Al Rayan and Al Khaliji will be effected by a statutory merger whereby Al Khaliji will be dissolved and all of its assets and liabilities shall become part of Al Rayan by operation of law with effect from completion of the Merger.

Al Rayan will issue 0.50 Al Rayan shares for every Al Khaliji share, corresponding to a total of 1,800 million new shares issued to Al Khaliji shareholders. The exchange ratio implies a premium to Al Khaliji shareholders of 21.4% versus the share price before the board meeting announcement to discuss the merger (closing share price as of January 5th 2021) and 66.7% versus the share price before the announcement of the initial negotiations regarding a potential merger (closing share price as of June 30th 2020).

The Merger Agreement is conditional on, amongst other things, obtaining regulatory approvals and upon the requisite resolutions being passed by the shareholders of Al Rayan and Al Khaliji. Both entities will continue to operate independently until the effective date of the Merger.

H.E. Mr. Ali Bin Ahmad Al Kuwari will become Chairman and H.E. Sheikh Hamad Bin Faisal Bin Thani Al-Thani will become Vice Chairman of the board of the merged entity.

The Executive Committee of the board will be chaired by H.E. Sheikh Hamad Bin Faisal Bin Thani Al-Thani.

TRANSACTION RATIONALE

The Merger, which has the support of the board of directors of Al Rayan and Al Khaliji, will, once effected, create a larger and stronger financial institution with a strong financial position and significant liquidity available to support Qatar’s economic growth and to finance development initiatives in line with the Qatar Vision 2030. Furthermore, it will create one of the largest Shari’ah-compliant banks in the State of Qatar and in the Middle East with combined assets worth around QR 172 billion (US$ 47 billion) as of September 30th, 2020.

The Merger is also expected to contribute positively to the economic development in the State of Qatar by supporting corporate businesses and small and medium sized entities, and will also create a strategic partner for the public sector. Additionally, the Merger will combine the key strengths of the two banks in the areas of retail and private banking services, corporate and government institutions, capital markets, and wealth and asset management, giving the combined business both an excellent proposition for customers and stability through diversification for shareholders.

The combined entity will have an enhanced presence in Qatar and selected international presence, which will help achieve market leading cost efficiency, increase future growth potential due to an increase in the capital base and have considerable synergy potential that could accelerate value creation for shareholders.

The Merger will create significant scope for achieving cost efficiencies in the coming years and is expected to unlock cost synergies in the region of 15% of the combined 9M’20 annualised cost base, after integration is completed, driven by increased scale and annual efficiency gains. There is also potential for revenue synergies between the two banks.

H.E. Ali Bin Ahmed Al Kuwari, Chairman of Al Rayan, said: “This is a landmark transaction that will contribute to the State of Qatar’s economic growth, vision and ambitions and is a testament to our commitment to creating a more robust Qatari banking system. The combined entity will create an even stronger institution that will aim to create value for our customers and shareholders.”

H.E. Sheikh Hamad bin Faisal bin Thani Al-Thani, Chairman of Al Khaliji, said: “The combination of both banks will create increased scale, capacity and efficiency to allow us to support our diverse customer base and drive the enhancement of our product offering across the board. We are confident that this transaction will contribute to the development of the economy as a whole.”

The management teams of both banks will shortly be setting up a committee to develop a detailed integration plan and will use appropriate resources to execute upon the identified and desired revenue and cost synergies, which will provide added value to shareholders and customers of the two banks and the national economy.

ADVISORS

J.P. Morgan is acting as financial advisor to Al Rayan and Al Khaliji in their role as members of the steering committee in connection with the Merger.

K&L Gates LLP and KPMG are acting as legal and transaction advisors to Al Rayan, respectively.

Clifford Chance LLP (in conjunction with Sultan Al-Abdulla & Partners) and EY are acting as the legal and transaction advisors to Al Khaliji, respectively.

KPMG have delivered a fairness opinion for the benefit of the Al Rayan Board.

Barclays have delivered a fairness opinion for the benefit of the Al Khaliji Board.

For full details of the Merger, investors should refer to the shareholder circular which will be published in due course

ABOUT MASRAF AL RAYAN

Masraf Al Rayan was incorporated as a Qatari Public Shareholding Company in 2006 and is a Shari’ah-compliant bank headquartered in Doha, Qatar.

Qatari government entities are major shareholders with more than 50% ownership and the bank is currently rated A1 by Moody’s.

Al Rayan’s principal business activities include:

• Retail banking: Offers current and savings account, time deposit account, financing and credit cards
• Wholesale banking: Offers corporate finance & advisory services, financing products, cash management, treasury, trade finance
• Private banking: Offers investment planning & asset management, wealth management, credit planning & management solutions

Al Rayan has a network of 17 branches (including the head office) in Qatar and 5 branches in the UK.
www.alrayan.com

IMPORTANT NOTICES

The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. You expressly agree that your use of the information within this press release is at your sole risk, and it is recommended that you seek your own independent financial and legal advice from your independent adviser(s). Shareholders of each of Masraf Al Rayan or Al Khalij Commercial Bank should also refer to the shareholder circular distributed to them in regard to the merger.

Statements contained in this press release are made as at the date of this document, unless some other time is specified in relation to them, and the publication of this document (or any action taken pursuant to it) shall not give rise to any implication that there has been no change in the facts or affairs of Masraf Al Rayan or Al Khalij Commercial Bank as set out in this document since such date. Nothing contained in this document is intended to be or shall be deemed to be a forecast, projection or estimate of the future financial performance of Masraf Al Rayan or Al Khalij Commercial Bank, and no statement in this document should be interpreted to mean that earnings per share for current or future financial periods of Masraf Al Rayan or Al Khalij Commercial Bank will necessarily match or exceed historical published earnings per share.