Post on 03-Apr-2018
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
1/21
11/12/2009
Submitted By: | Group 5
PROJECT
REPORTMCBACQUIRES RBS
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
2/21
Business Finance Page 2
TABLE OF CONTENTS
Acknowledgement ..
Executive summary.. 1
The Background.. 4
Previous deals. 5About MCB.. 6
About RBS....10
ABN Amro renamed to RBS in
Pakistan...12
Deal details..15
Post acquisition
effects...16
Conclusion .20
References .21
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
3/21
Business Finance Page 3
ACKNOWLEDGEMENT
First of all, thanks to ALLAH S.W.T, for his mercy and guidance to giving us the
full strength to complete this Report subjected MCB ACQUIRES R.B.S.
Even facing with some difficulties in completing this task, we still managed to
complete it.
We thanks to our respectable teacher, Mr. Ghulam Rasool, who provided us this
challenging opportunity of learning, which turned out to be very knowledgeable
and in-depth learning experience for us regarding the real business situation which
got us down to the brass tacks.
In addition we are also gratefully acknowledging the help to all of our friends who
had shared their time and knowledge in completing this report.
Thank you.
Group 5
(Haris, Zohaid, Haifz Faisal Adnan, Ayaz & Bilal)
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
4/21
Business Finance Page 4
Executive Summary
RBS is the formerly NO 1 bank in the world before selling their operations in Asia. InPakistan, banking giant MCB purchases RBS last month & ANZ takeover RBS in restof Asia.
Given the identical positioning of both the banks in the market, the combined entityof MCB and RBS will deliver economies of scale, a more complete product set, a
stronger operating platform and a wider distribution network. This acquisition willmake MCB stronger and have the opportunity to make their image better.
Though, RBS will officially operated as MCB in next six months but the managementtakeover still remains, which will completely change the internal business processesand policies.
But, The State bank of Pakistan has not yet granted approval to MCBs mergerwith Royal Bank of Scotland, leading to a delay in completion of the acquisitionprocess. According to sources, the central bank has raised objections that approvalwill be granted only when MCB fulfills the requirement regarding completion of
sponsors shares. The central bank has raised the objection over MCBs violation ofclause-4 of banking law. Under the legal requirement, the sponsors shares are to bedeposited at CDC. However, the experts view this requirement as inapplicable in thetransaction in question while the requirement of Central Depository Company is alsonot applicable here. According to experts, State Bank should have scrutinized RoyalBank of Scotlands assets under the respective articles before approving the saiddeal.
Also behind the curtains news that it is a political stint too, Mr. Zardari against theMian Mansha, as he is also the close aide of Mr. Nawaz Sharif.
Initially HBL was also interested but failed to bid more than MCB, remember HBLsowner is Prince Karim A a Khan.
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
5/21
Business Finance Page 5
The Background
MCB Bank is to acquire this from ABN Amro Bank N.V., which isa subsidiary of The Royal Bank of Scotland Group plc.
The Royal Bank of Scotland Group plc has reached agreement in principle for thesale of its 99.37 per cent holding in The Royal Bank of Scotland Limited (RBSPakistan) to MCB Bank Limited (MCB) for a total consideration of $87 million,RBS is 70 per cent owned by the state after a massive bailout from the Britishgovernment last year amid the global financial crisis.Besides MCB Bank, Habib Bank Ltd., Egypt's Orascom Telecom Holdings and localinvestment bank Jehangir Siddiqui Group had evinced interest in buying theassets earlier.The deal would be valued at around $90 million. The Pakistan sale is part ofmoves by part-nationalized RBS to sell assets globally as it tries to exit up to 36countries and focus on its mainly U.K. Core businesses.
Bank of America Merrill Lynch and KASB Securities have advised MCB whileMorgan Stanley has advised The Royal Bank of Scotland Group plc on thetransaction.The RBS sale in Pakistan attracted large banks, like Habib Bank and MCB Bank,while a relatively small Bank JSCL was in the race to win the RBS. The HBL laterwithdrew itself.Industry sources said that after the withdrawal of the HBL, the MCB Bank was theonly one which could offer higher and attractive bids to acquire the RBS.In its Asia Operations, RBS Pakistan has the largest branch network while on thebasis of customers; it ranks number 5 in Pakistan.
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
6/21
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
7/21
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
8/21
Business Finance Page 8
MCB is Pakistans fourth largest bank by assets having
an asset base of US$6.7 billion, and the largest by
market capitalization having a market capitalization of
US$4.1 billion. The Bank has a customer base of
approximately 4 million and a nationwide distribution
network of 1,026 branches, including 8 Islamic banking
branches, and over 300 ATMs, in a market with a
population of 160 million.
MCB is one of the leading banks of Pakistan with a
deposit base of about Rs. 280 billion and total assets of
around Rs.300 billion. Incorporated in 1947, MCB soon
earned the reputation of a solid and conservative
financial institution managed by expatriate executives.
In 1974, MCB was nationalized along with all other
private sector banks.
The Bank has a customer base of approximately 4
million, a nationwide distribution network of over1,000 branches and over 400 ATMs in the market..
During the last fifteen years, the Bank has
concentrated on growth through improving service
quality, investment in technology and people, utilizing
its extensive branch network, developing a large and
stable deposit base.
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
9/21
Business Finance Page 9
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
10/21
Business Finance Page 10
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
11/21
Business Finance Page 11
About RBSThe Royal Bank of Scotland Group (LSE: RBS) is a British banking and
insurance holding company in which HM Treasury holds a 80.4% controllingshare, through UK Financial Investments Limited. The group is based inEdinburgh, Scotland, and is the world's largest company by assets.The group controls the Royal Bank of Scotland Plc, founded in 1727 by aRoyal Charter of King George I, the National Westminster Bank, which cantrace its lineage back to 1650, and Ulster Bank in Ireland.RBS Group is the largest banking group in Scotland, and at its earlier peakwas the second largest in the UK and Europe (fifth in stock market value)and the fifth largest in the world by market capitalization. According toForbes Global 2000, it was the tenth largest company in the world. Itsshares have a primary listing on the London Stock Exchange. The registeredhead office of the group and the UK clearing bank are located at St AndrewSquare, Edinburgh. In 2005, Queen Elizabeth II opened the bank's newhead office building in Gogarburn, Edinburgh.The RBS Group operates a wide variety of banking brands offering persona
and business banking, private banking, insurance and corporate financethroughout its operations located in Europe, North America and Asia. In theUK and Republic of Ireland, the main subsidiary companies are: The RoyaBank of Scotland; National Westminster Bank; Ulster Bank; Drummondsand Coutts & Co. In the United States, it owns Citizens Financial Group, the8th largest bank in the country. From 2004 to 2009 it was the secondlargest shareholder in the Bank of China, itself the world's fifth largest bankby market capitalization in February 2008. Insurance companies includeChurchill Insurance, Direct Line, Privilege, and NIG.The group issues banknotes in Scotland and Northern Ireland and, as of2008, Royal Bank of Scotland is the only bank in the UK.
2RBS
The Royal Bank of Scotland
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
12/21
Business Finance Page 12
History of Royal Bank of Scotland
The Royal Bank of Scotland Group has grown from small beginnings nearly300 years ago to become one of the largest financial services groups in theworld. Our brands operate around the globe to provide banking services for
individuals, businesses and institutions. Proud of our history, we remaincommitted to innovation and service.
The successful consortium bid for ABN AMRO in 2007 has furtherstrengthened the Group's presence in Asia.
ABN AMRO has had a long history in Hong Kong, stemming from theopening of offices in 1906 by two of its largest and oldest predecessors -Nederlandsche Handel-Maatschappij (NHM) and Nederlandsch-IndischeHandelsbank (NIHB). The RBS group now has a presence in the regionthrough 180 branches in 16 countries, including Australia, China, HongKong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Pakistan,Philippines, Singapore, Taiwan, Thailand, UAE and Vietnam.
The Group serves a broad array of medium to large enterprises, including
MNCs and financial institutions, offering integrated consumer and businessbanking services such as transaction banking, risk management, investmentbanking, private banking and asset management.
Our clients across the world each have different aspirations, goals andneeds, so we work closely with them to ensure that our service is integratedand appropriate in providing solutions for their particular personal andbusiness circumstances.
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
13/21
Business Finance Page 13
world. With an AA credit rating, RBSgroup has more than 40 million customersworldwide and total assets, as of 31December 2007, of 2.4billion. Ourbrands operate around the globe anddown your street to provide bankingservices for individuals, businesses andinstitutions. Proud of our history, we
remain committed to innovation andservice in business and through ourmany sponsorship activities.Banking sources said the MCB Bank wasmaking efforts to buy the RBS Pakistanoperations to further strengthen itsposition in the industry.
Acquisition Reasons
RBS
On 22 April 2003 RBS announced thelargest rights issue in British corporatehistory, which aimed to raise 12billion innew capital to offset a write down of5.9billion resulting from the badinvestments and to shore up its reservesfollowing the purchase of ABN AMRO.On 13 October 2008, British PrimeMinister Gordon Brown announced a UKGovernment bailout of the financial
system. The Treasury would infuse 37
billion ($64 billion, 47 billion) of newcapital into Royal Bank of Scotland GroupPlc, Lloyds TSB and HBOS Plc, to avertfinancial sector collapse. This resulted in atotal government ownership in RBS of58%.As a consequence of this rescue the chiefexecutive of the group Sir Fred Goodwinoffered his resignation, which was duly
accepted.
Pakistan is among the first Asian markets
where ABN AMRO has been re-branded as
RBS effective from August 1 as approved
by local regulators. ABN AMRO Bank(Pakistan) Ltd will now be officially
renamed as The Royal Bank of Scotland
Ltd. This follows the successful global
acquisition of ABN AMRO in October 2007
by an RBS-led consortium.
A press statement of the bank said
presently RBS was the second largest
financial services group by profit, with an
AA- credit rating with total assets of
1,900.5 billion pound sterling as ofDecember 31, 2007.
The Royal Bank of Scotland Group has
grown from small beginnings nearly 300
years ago to become the second largest
financial services group by profit in the
ABN Amro renamed to
RBS in Pakistan
The Royal Bank of Scotland (RBS) Groupformally re-branded ABN AMRObranches in Pakistan on Friday, August
1, 2008.
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
14/21
Business Finance Page 14
In January 2009 it was announced that RBS had made a loss of 28bn of
which 20bn was due to ABN AMRO.[10] At the same time the government
converted their preference shares to ordinary shares resulting in a 70%
ownership of RBS.
The potential 28 billion loss is nearly twice the size of Vodafone's 15
billion deficit in 2006, currently the biggest-ever corporate loss in UK
history.
News of RBS's record-breaking deficit came as the government announced asecond support package for banks designed to counter recession by kick-
starting lending to businesses and consumers.
The scheme failed to reassure investors, however, and RBS shares closed
down 67 percent at 11.6 pence, having earlier slumped to 10 pence.
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
15/21
Business Finance Page 15
MCB Interest in RBS
MCB interested in RBS's assets to gain clients from multinational companies,
its consumer banking network and a few prized branches in main cities.
The attractive element for MCB is RBS's consumer banking network as it is a
strong player in that.
Moreover, RBS is also technologically sound with quality human resource
that can add value in each of the interested banks.
However, RBS asset quality is worst amongst the three banks which means
the RBS would have to discount the price at the time of agreement.
Banking sources said the MCB Bank was making efforts to buy the RBS
Pakistan operations to further strengthen its position in the industry.
Analysts said the RBS has a sound customer base of 226,000 (by Dec 2007)
with quality infrastructure. This could earn much higher price than the deals
signed before for the sale of different banks.
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
16/21
Business Finance Page 16
Acquisition details
MCB will initially acquire 1,707,107,891 ordinary shares from RBS Pakistan
at Rs4.22 per share - representing a 99.37 per cent stake. The total
consideration to be paid will be Rs7.2 billion (approximately $87 million). In
addition, MCB will make a tender offer for the remaining 0.63 per cent
ordinary shares, which were not owned by the majority shareholder under
the Listed Companies (Substantial Acquisitions of Voting Shares and
Takeovers) Regulations, 2008. This tender offer will also be subject to the
necessary regulatory and other approvals. MCB said it would fund the
transaction entirely through internally generated cash reserves and would
not be contingent on any external fund raising. ($1 = 82.86 rupees)
The price would be 0.76 times RBS Pakistan's book value of 9.888 billion
rupees, as of March 31. They will pay around 7.5 billion rupees ($90.4
million) for RBS Pakistan The MCB deal to buy out RBS is a continuation of a
positive trend in Pakistan. For MCB, the deal for US$87m is extremely
attractive. The market was expecting a higher value said Shuja Rizvi, a
Karachi based equity and business analyst. Remaining shares: In addition,MCB will make a tender offer for the remaining 0.63 percent of ordinary
shares not owned by the majority shareholder under the Listed Companies
(Substantial Acquisitions of Voting Shares and Takeovers) Regulations,
2008. The tender offer will also be subject to the necessary regulatory and
other approvals. The Pakistan sale is part of moves by part-nationalised RBS
to sell assets globally as it tries to exit up to 36 countries and focus on its
mainly U.K. core businesses.
The assets would help the buyer tap growth in a nation that forecasts an
economic revival for the fiscal year that started July 1 after the governmentpredicted a 3.3 per cent expansion. Pakistan's economy may expand more
than 6 per cent annually on average over the next five years, Shaukat
Tarin, adviser to Prime Minister Syed Yousaf Raza Gilani, said in March.
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
17/21
Business Finance Page 17
Post acquisition effects
After acquiring RBS operations, MCB branch expansion nd customer base is
expected to increase and it will facilitate customers more aggressively.
As a result of the transaction, the total number of branches of combined
MCB and the acquired bank will increase to 1,139. The total consolidated
deposits will increase to Rs 413 billion and consolidated gross advances toRs 324 billion.
MCB will add more than 75 RBS Pakistan branches in 24 cities, taking its
total network to 1,139 branches.
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
18/21
Business Finance Page 18
Acquisition is pending
On the other hand, State Bank of Pakistan has not yet granted approval to
MCB's merger with Royal Bank of Scotland (RBS), leading to a delay in
completion of the acquisition process. According to sources, the central
bank has raised objections that approval will be granted only when MCB
fulfils the requirements regarding completion of sponsor's shares. The
central bank has raised the objection over MCB's violation of clause-4 ofbanking law. Under the legal requirement, the sponsor's shares are to be
deposited at CDC. However, the experts view this requirement as
inapplicable in the transaction in question while the requirement of Central
Depository Company is also not applicable here. People also say that the
muss between a giant business group and a senior leader of the political
government has now intensified as the non-CBA staff union led by the
general secretary Karachi wing of the ruling party expanded their agitation
here Monday.
At a time when country's economy is almost at a halt, efforts are on to
discourage whatever economic activities are left with the backing of ruling
party. Some of the political and financial analysts are linking this action of
staff union with the tussle between the head of the giant business group
and a senior-level party leader. They are of the view that the pending issue
of RBS merger with MCB could also be part of this bout, while the criticism
on Kerry-Lugar Bill by Mian Muhammad Mansha could be the retaliation.
Earlier in his statement to a private TV news channel, Mian Mohammad
Mansha, Chairman Nishat Group of Companies, had said that he has
brought $1 billion to Pakistan from abroad through the private sector and
could bring $1.5 billion a year, equal to US aid in Kerry-Lugar Bill.
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
19/21
Business Finance Page 19
Acquisition is pending(Continued from previous section)
To create hurdles in smooth functioning of the Bank, which is the significan
part of Mansha Group's business, members of the union again blocked man
of the branches Monday, despite of Sindh High Court orders in a petition
filed by the Bank. The MCB Bank management issued a press circular
Monday saying a group of outsiders is illegally interfering in the normalbusiness activities of the bank.
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
20/21
Business Finance Page 20
THE CONCLUSION
The past few years of economical disruption had bankrupted or borderline many large
international financial institutions, the big names included Merrill Lynch, Lehman Brothers
and R.B.S.
The financial market of Pakistan was also affected with the situation, but not to the extent ofinternational financial markets.
While, with the disruption came along board some opportunities as well which were seized
by the private sector entrepreneurs. One of them is the case of acquisition of R.B.S by a local
private bank MCB.
The acquisition is largely in market interest, not only due to the good circulation of capital,
but to boost investors confidence as well. However, the acquisition is currently seem vague
for the reasons maybe latent in the way in which deals are handled in our country where
national interest get overlaps with personal gain & political approval.
The acquisition of RBS by the MCB management is still remains, because the State bank of
Pakistan has not yet granted approval to MCBs merger with Royal Bank of Scotland, leading
to a delay in completion of the acquisition process. According to sources, the central bank
has raised objections that approval will be granted only when MCB fulfills the requirement
regarding completion of sponsors shares.
Rumors says that, behind the curtains there is an political stint, which is that Mr. Zardari
against the Mian Mansha, as he is also the close aide of Mr. Nawaz Sharif, and thats been
the reason the central bank has raised the objection over MCBs for the violation of clause-4
of banking law, however, the experts view this requirement as inapplicable in the transaction
in question while the requirement of Central Depository Company is also not applicable here.
We are in sincere opinion that Government should aid such private investment opportunities
which help in the revival of our economy.
7/28/2019 Business Finance Report on MCB ACQUIRES RBSeport Final MCB ACQUIRES RBS
21/21
RFEFERENCES
mcb.com.pk
rbs.com.pk
wikipedia.com/rbs,
financial times.com
www.aaj.tv/
www.geo.tv/
www.bbc.com
http://www.aaj.tv/http://www.aaj.tv/http://www.geo.tv/http://www.geo.tv/http://www.bbc.com/http://www.bbc.com/http://www.bbc.com/http://www.geo.tv/http://www.aaj.tv/