By Lawrence White and Sinead Cruise
LONDON (Reuters) - Reports of renewed interest from First Abu Dhabi Bank (FAB) in acquiring Standard Chartered (LON:STAN) could breathe new life into its stock, which has languished for years on stalled revenue growth.
Although FAB abandoned a formal bid for StanChart, as it is widely known, recent media reports have said that the Abu Dhabi bank is still interested in the London-based lender led by global investment banking veteran Bill Winters.
But any fresh takeover approach must remain on ice until a six-month cooling-off period expires, while a merger could expect to face a host of regulatory and practical obstacles.
StanChart declined to comment on the reports of a fresh bid, while FAB did not respond to requests for comment.
While StanChart's balance sheet, staff numbers and global footprint dwarf FAB's, it is worth half as much.
"This is an attractive deal for shareholders as Standard Chartered lags behind peers due to lack of scale in some of the key countries it operates," Viki Farmaki, an analyst at State Street (NYSE:STT) Global Investors, said.
StanChart's shares rose by 11% on Thursday after Bloomberg News reported that a possible FAB bid would value its target at $30 billion to $35 billion, a significant premium to the Asia-focused banking powerhouse's $24 billion market value.
Investors and analysts said a merger between FAB and StanChart could deliver for bullish investors keen to capture the upside of China's post-pandemic reopening, while also cashing in on an oil-based boom in Middle Eastern economies.
"Whether other approaches appear is a matter of speculation, but it is certain that the Middle East wants to use its firepower to do more M&A to reduce its dependence on oil revenues," one StanChart shareholder told Reuters.
StanChart is inexpensive relative to peers, with a 12-month forward price to book ratio, which measures the value of its shares against the value of its assets, of just 0.51.
That is below rival HSBC (LON:HSBA)'s 0.79 and an industry median of 0.92, according to Refinitiv data.
The metric, which suggests whether a company is over- or under-valued, implies StanChart is trading below the value of its assets and a takeover could unlock its true worth.
Graphic: StanChart PB- https://fingfx.thomsonreuters.com/gfx/mkt/dwvkdeqqopm/Stan%20Chart.PNG
Meanwhile, the two banks' current size and key metrics, according to Refinitiv data and latest available company data, show the disparity in scale and valuation of the two banks.
First Abu Dhabi Bank Standard Chartered
Market Cap. $43 billion $24 billion
Global staff 6,600 85,000
Total assets $302 billion $827 billion
Price/book 1.37 0.51
(12-month
forward)
Global presence 19 markets, strength 59 markets, strength
in Middle East in Asia, UAE, Africa
If FAB does decide to make a fresh bid, StanChart's loyal UK-based investors are unlikely to give up their stock cheaply, particularly as many will likely lose the mandate to stay invested in the combined entity.
A second shareholder questioned whether FAB's shares would be attractive to British-based holders of StanChart stock.
"I can't think shareholders would relish adding a small Gulf bank to Stan's current geographic mix," the investor added.