Dubai's government moved to create the Gulf's largest bank by assets yesterday by combining Emirates Bank International and smaller National Bank of Dubai in an $11.3 billion deal.The enlarged bank, called Emirates NDB PJSC and created at the behest of Dubai's ruler, will have about a fifth of total assets, loans and deposits in the UAE.

The all-share deal, which puts Emirates Bank shareholders in control and its management in the top jobs, was announced in March.

Shareholders in Emirates Bank will own 66.3 per cent of the enlarged bank and National Bank will own 33.7pc, the pair said. The Dubai government, a shareholder in both, will own 56pc of the combined group Emirates NDB. Emirates Bank chairman Ahmed Al Tayer and chief executive Rick Pudner will be chairman and CEO of the new bank.

Emirates Bank shareholders will swap their stock for the new bank's shares on a one-for-one basis at their July 1 closing price of 9.30 dirhams ($2.53), while National Bank shares will be exchanged at 8.84 dirhams, 3.3pc below their last trade at a ratio of 0.95 shares in the new bank for every one held.

Both stocks have been suspended since July 1.

"We thought National Bank shareholders would get more for their shares," said Raj Madha, a senior research analyst with the Egyptian investment bank EFG-Hermes.



The banks said in March they had been asked to merge by Dubai's ruler Shaikh Mohammed bin Rashid Al Maktoum to form a lender large enough to meet the demands of an economy surging on a tripling of oil prices since 2002.

"There is more competition on our own soil from the (global) giants. We are trying to consolidate to compete," National Bank Chairman Abdullah Saleh told reporters.

Other Gulf lenders, including National Bank of Abu Dhabi and Qatar National Bank have said they are looking for acquisitions to gain the scale needed to finance large infrastructure projects and meet demand for credit.

"This is a government-directed merger. I wouldn't be surprised if a similar merger happened in Abu Dhabi," said Karti Inamdar, senior credit analyst at Cyprus-based Capital Intelligence.

The two Dubai banks, which first attempted a merger in 1999, will top the market value of National Bank of Abu Dhabi, until now the largest in the UAE.

They had assets worth $48.7bn on March 31, surpassing Saudi Arabia's National Commercial Bank as the Gulf's largest lender by assets.