Lebanon’s Bank Audi has bought Banque Saradar in a US$159mn cash and equity deal to create the country’s largest banking group by assets. “This operation is unique, it is the first consolidation between two top 10 banks in the country,” Freddie Baz, advisor to Audi’s chairman, says.

The central bank, which fosters consolidation in Lebanon’s fragmented banking sector, is expected to approve the merger – the biggest in Lebanon’s banking history.

Under the deal, Audi has acquired all the shares of Saradar for US$100mn in cash. Saradar shareholders will also be issued with shares worth 9% of the new entity, based on a US$159mn valuation of Saradar.

Baz says the two institutions will maintain their present form, under a new group called Audi-Saradar Group, but become increasingly specialised.

Analysts have welcomed the deal as a sign of increasing consolidation, and say the two institutions are well-suited in corporate culture and human capital.

“This should trigger more consolidation,” comments one Lebanese analyst. “They (banks) will all be looking for potential partners now.”

Baz adds that the deal would also help quench Audi’s thirst for regional expansion.

Audi already has an extensive retail network and a handful of branches in Europe. It won a licence in January to open a network of branches in Jordan.

Saradar, which is active in corporate, private and investment banking, has strong ties to rich clients in the Gulf and acts as a correspondent in Beirut and Paris for Gulf banks.

“When we foster our position in the local market we will be most ready to support the expansion strategy,” Baz says.

Based on 2003 figures, the consolidated assets of the new group amount to US$9.06bn, with deposits at US$7.56bn and loans at US$1.97bn.

Blom, which has long occupied the position of Lebanon’s largest bank, has registered assets of US$8.8bn in its 2003 financial statement and customer deposits of US$7.7bn.