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Circular of the Board of Directors of Samba Financial Group

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Circular of the Board of Directors of Samba Financial Group 1 Samba Financial Group Board of Directors Circular www.samba.com 2 Samba Financial Group (Commercial Registration: 1010035319) Circular of the Board of Directors of Samba Financial Group This document is issued by the board of directors of Samba Financial Group (“Samba”) and addressed to Samba’s shareholders in respect of the Offer extended by the National Commercial Bank (“NCB”) to merge Samba into NCB in consideration for new shares in NCB pursuant to Articles 191-193. of the Companies Law and Article 49(a)(1) of the Merger and Acquisition Regulations, which was prepared in accordance with the requirements of Article 39 of the Merger and Acquisition Regulations (the “Circular”). This Circular includes the opinion of the Samba Board of Directors in respect of the Offer addressed to the shareholder of Samba for the purpose of merging Samba in the NCB, and the plans of NCB regarding Samba and its employees; in addition to, the independent advice provided to the Samba Board of Directors by Morgan Stanley Saudi Arabia which has been appointed as the financial advisor in connection to the merger deal. Accordingly, this Circular shall be read in full and reviewed carefully to cover all sections. If there is any doubt in relation to the voting decision that should be taken at the EGM in connection with the Merger, Samba recommends that you seek your own independent financial advice from an independent financial advisor authorized by the Saudi Arabian Capital Market Authority. Samba has entered into a merger agreement with the NCB on 24/02/1442H (corresponding to 11/10/2020G) (the “Merger Agreement”) for the purpose of merging Samba in NCB whereby all of the assets and liabilities of Samba will be transferred to NCB (the “Merger”), in consideration for NCB issuing one billion, four hundred seventy-eight million (1,478,000,000) ordinary shares with a nominal value of ten Saudi Riyals (SAR 10) per share in NCB in favors of Samba shareholders (the “Consideration Shares”) by way of increasing the paid-up capital of NCB from thirty billion Saudi Riyals (SAR 30,000,000,000) to forty-four billion seven hundred eighty million Saudi Riyals (SAR 44,780,000,000) and increasing the number of shares from three billion (3,000,000,000) shares to four billion four hundred seventy-eight million (4,478,000,000) shares which represents an increase of 49.3% of NCB current capital subject to satisfying the conditions of the Merger as specified in the Merger Agreement which are summarized in Section ( 8.1) (“Merger Agreement ”) of this Circular (noting that such conditions may not be amended or waived without the approval of both banks). Pursuant to the Merger, the assets and liability of Samba will be transferred to NCB in consideration for the issue of the Consideration Shares to Samba shareholders who are registered in the shareholders’ register of Samba at the end of the second trading period following the Effective Date. For every Samba share held, NCB will issue 0.739 NCB shares as consideration (the “Exchange Ratio”). Following the Effective Date, NCB will continue to exist and all Samba shares will be delisted from Tadawul and Samba will cease to exist by operation of law pursuant to the provisions of Articles 191-193 of the Companies Law and Article 49(a)(1) of the Merger and Acquisition Regulations. Reference to the “Combined Bank” in this Circular means NCB following the Effective Date (for further information, see Section (10) (“Procedures Required for Completion”). In the event that the calculation of the number of shares owned by any Samba shareholder based on the Exchange Ratio resulted in fractional shares, the resulting figure will be rounded down to the nearest number. For example, if a Samba Shareholder holds 100 Samba Shares, he or she will receive 73 Consideration Shares (and not 74 Consideration Shares). NCB shall aggregate all fractional entitlements and sell the corresponding NCB shares on behalf of all Samba shareholders who would otherwise have been entitled to receive a fractional 3 NCB share in the market for cash, and subsequently distribute the net cash proceeds to such Samba shareholders proportionate to their respective fractional entitlements. Any expenses in relation to the sale of fractional shares, will be paid from the proceeds of such sale. The total value of the Merger is determined on the basis of the value of the Consideration Shares. The total nominal value of the Consideration Shares is fourteen billion seven hundred eighty million Saudi Riyals (SAR 14,780,000,000). The total market value of the Consideration Shares as determined on the basis of the Exchange Ratio and the closing price of SAR 38.50 per NCB share on 8 October 2020G (which is the last trading day prior to the date of the entering into the Merger Agreement) is fifty-six billion nine hundred three million Saudi Riyals (SAR 56,903,000,000). The total value of the Consideration Shares (as will be recorded on the financial accounts of NCB) will be determined at a later stage on the basis of the closing price of NCB share on the last trading day prior to the Effective Date. (for further information relating to the risks related to that, please see section (1) (“Risks Factors”) of the Offer Document). It should be noted that the Completion of the Merger is conditional upon obtaining the approval of the Samba EGM and NCB EGM. For more details of the conditions to, and process for, implementing the Merger, see Section ( 8.1) (“Merger Agreement”) and Section (10) (“Procedures Required for Completion”) of this Circular. For the avoidance of doubt, and subject to satisfying all of the other Merger conditions, if the Merger Resolution is approved by the requisite number of Samba Shares (at least three-fourths of the shares represented at the meeting) at the Samba EGM, Samba will be dissolved by operation of law and its shares will be delisted and the assets and liabilities of Samba will be transferred to the Combined Bank. Upon Completion, all of Samba shareholders (including those who voted against or did not vote on the Merger Resolutions) will receive the Consideration Shares in the Combined Bank in accordance with the Exchange Ratio. The Completion will result in NCB’s capital increasing from thirty billion Saudi Riyals (SAR 30,000,000,000) to forty-four billion seven hundred eighty million (SAR 44,780,000,000). For more details on the effects of the Merger on NCB and Samba and its rationale, please refer to Section ( 4.2) (“Benefits to NCB and Samba shareholders”) of this Circular. If Samba Shareholders’ approval has been obtained and all other conditions of the Merger are satisfied, Samba shareholders will own 32.6% of the Combined Bank’s capital (excluding treasury shares for both Banks), and the ownership of the current NCB shareholders will be 67.4% of the Combined Bank’s capital (excluding treasury shares for both Banks). The Consideration Shares will entitle its holders to receive dividends declared by the Combined Bank following Effective Date. In addition, Completion will result in a number of changes in the composition of the Combined Bank’s Board from the Effective Date (for further information on proposed changes to the Combined Bank’s Board composition, see Section ( 8.1) (“Merger Agreement”) of this Circular. An application has been made by NCB to the CMA for the Consideration Shares to be registered and offered, in addition to an application made to the Saudi Stock Exchange (Tadawul) for the Consideration Shares to be listed on Tadawul. The Offer Document has been submitted to and approved by the CMA for publication, and all requirements of the CMA have been supplied and, subject to the required EGM resolutions being passed at NCB EGM and Samba EGM, all relevant regulatory approvals pertaining to the Merger have been granted. As of the date of this Circular, The Substantial Shareholders of Samba are Public Investment Fund (“PIF”) owning 22.9%, Public Pension Agency (“PPA”) owning 11.5%, and General Organization for Social Insurance (“GOSI”) owning 7.1%. The Substantial Shareholders of NCB are as follows: PIF owning 44.29%, PPA owning 5.36%, and GOSI owning 5.18%. 4 The Merger is deemed to involve a Related Party transaction as PIF, PPA, and GOSI are Substantial Shareholders in Samba and NCB, and they have representations on the boards of both Banks. Pursuant to Article 191(4) of the Companies Law, a shareholder that holds shares in both NCB and Samba, including shareholders that are Related Parties, can only vote on the Merger Resolutions in the EGM of one of the Banks. (for further information, see Section ( 6) (“Related Parties and Interested Board Members in the Merger”) of this Circular. A number of members of the Samba Board of Directors and NCB Board of Directors have a conflict of inter- est in the Merger, whereby Mr. Yazed Abdulrahman Al Humaid (in his capacity as the board representative of PIF in the Samba Board of Directors), Dr. Ibrahim Saad Al Mojail (in his capacity as the board representative of PIF in the Samba Board of Directors and due to his direct ownership in NCB), Mr. Eyad Abdulrahman Al Husain (in his capacity as the board representative of GOSI in the Samba Board of Directors), Mr. Ali Hussain Ali Reda (in his capacity as the board representative of PPA in the Samba Board of Directors and due to his di- rect ownership in NCB) and Dr. Walid Sulaiman Abanumay (due to his direct ownership in NCB) have declared their conflict of interest to the Samba Board of Directors and therefore did not vote on the resolution of the Samba Board of Directors approving Samba’s entry into the Merger Agreement.
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