HSBC Bank Oman has agreed to enter into a non-binding MoU with Sohar International Bank to proceed with talks in relation to a possible merger.

In separate statements to the Muscat Stock Exchange, the lenders said a potential cash-and-shares deal would see HSBC Oman dissolved and its shareholders offered shares in Sohar or cash not exceeding 70% of the total. The deal would value both HSBC Oman and Sohar International at 1.0x book value.

The discussions and negotiations towards the potential merger are subject to due diligence, and regulatory and shareholder approvals.

HSBC Oman's market capitalisation was $678 million as Monday closing, based on Refinitiv Eikon data. Sohar International Bank’s market value is $812 million.

HSBC Oman, which is a unit of UK-based HSBC Holdings, also said in a separate statement that HSBC Middle East Ltd. intends to set up a wholly-owned bank branch in Oman. If the current proposed merger discussions with Sohar was to lead to a binding agreement, HBME would then seek regulatory approvals for setting up the new branch.

(Reporting by Brinda Darasha; editing by Seban Scaria)