Home Finance News United Bank Limited’s Offer to Silkbank Aims to Reshape the Banking Sector with a New Scheme of Arrangement

United Bank Limited’s Offer to Silkbank Aims to Reshape the Banking Sector with a New Scheme of Arrangement

by web desk

In a recent development poised to impact Pakistan’s banking industry, United Bank Limited (UBL) has formally submitted a proposal to Silkbank Limited (Silkbank) for a potential merger. This significant step was disclosed to the Pakistan Stock Exchange Limited (PSX) on November 1, 2024, and represents a major shift in the financial landscape of Pakistan.

Key Highlights of the Merger Proposal

  1. Offer for Merger
    UBL, through its letter dated October 31, 2024, has extended an offer to Silkbank, expressing its intent to merge Silkbank into UBL. This merger plan, referred to as the “Scheme of Arrangement,” requires sanctioning by the State Bank of Pakistan (SBP) under Section 48 of the Banking Companies Ordinance, 1962. This regulatory approval is crucial as it will determine the feasibility and legality of the merger.
  2. Share Exchange Ratio
    UBL has proposed a share exchange ratio that would benefit Silkbank shareholders. According to the proposal, UBL will issue and allot new ordinary shares in exchange for Silkbank shares, following a ratio of 1 new UBL share for every 325 Silkbank shares. This exchange mechanism is central to the merger and reflects UBL’s strategic approach in valuing Silkbank’s equity.
  3. Conditional Completion
    The proposal emphasizes that the merger’s completion remains contingent on various conditions. These include approval from Silkbank’s board and shareholders, completion of negotiations and documentation, and securing all required regulatory approvals, particularly the SBP’s sanctioning of the Scheme. This multi-step approval process ensures that all legal and financial standards are met before the merger is finalized.

Regulatory Compliance and Transparency

In compliance with Sections 96 and 131 of the Securities Act, 2015, and Clause 5.6.1(a) of the PSX Rule Book, UBL has provided this material information to the Pakistan Stock Exchange. This disclosure also adheres to the requirements set forth under S.R.O. 143(I)/2012, dated December 5, 2012, demonstrating UBL’s commitment to transparency in all its dealings.

What This Merger Means for Pakistan’s Banking Sector

The merger between UBL and Silkbank could mark a transformative period for Pakistan’s banking industry, potentially increasing market consolidation and strengthening UBL’s competitive position. For Silkbank shareholders, the proposed share exchange ratio might offer an opportunity to be part of a larger, more robust financial institution. This potential merger could lead to an expansion of UBL’s customer base, an enhanced range of services, and improved financial stability.

This proposal awaits approvals, and the outcome could set a precedent for future mergers and acquisitions within Pakistan’s banking sector. The attention to regulatory compliance, detailed financial planning, and transparency in disclosure underscore UBL’s commitment to a well-structured merger.

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