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August 17, 2022

Erste Group agrees with four SIFs to acquire a 24 pc stake in BCR

Through the privatisation contract, the financial institution committed itself to listing BCR within three years from the completion of the October 2009 takeover.

Erste Group Bank AG (Erste Group) announces it has reached an agreement in principle with four of the five SIF minority shareholders in Banca Comerciala Romana (BCR) – SIF Banat Crisana, SIF Transilvania, SIF Muntenia and SIF Oltenia (participating SIFs) – whereby Erste Group will acquire their 24.12 per cent stake or 2,618,286,036 shares in BCR, a press release informs. Also, ?uca Zbârcea & Asocia?ii’s lawyers have been advising Erste Bank for the past months on reaching an agreement in principle with four of the bank’s five minority shareholders. The agreement was reached after several months of discussions and negotiations and it will mark the largest transaction concluded in Romania since the beginning of 2011 and also one of the most important in the financial services sector since the advent of the crisis, a press communiqué reports. “It has always been our strategy to hold the highest possible stake in our subsidiaries and we are glad to have now this possibility also in Romania. Despite the recent tough period, Erste Group as a strategic investor is taking the long term view and we thus maintain our confidence in and commitment to Romania,” stated Manfred Wimmer, Chief Financial Officer, Erste Group.

Subject to the successful completion of the respective SIF corporate approval processes, the acquisition will be carried out in a series of transactions. SIF Moldova has the possibility to enter into the same agreement if it decides to do so. “Erste Group shares for up to 2,060,418,750 BCR shares at an exchange ratio of 1:127.9583. Cash for up to 424,190,702 BCR shares at a price of RON 1.0385 per share. Cash for up to 133,676,584 2011 profit shares1 at nominal value of RON 0.1 per share. For those shares not tendered in 2011, the participating SIFs will be granted a put option for 2012 and 2013 at the terms of the current offer. Subsequent to the completion of the transaction, Erste Group’s participation in BCR is set to increase to 93.52 per cent.

Based on a one month average share price of Erste Group of EUR 25.69, the transaction values BCR at a price/book multiple of 1.26x, in line with market valuations for Romanian and CEE banks. To support the financial terms of the transaction a fairness opinion was issued by Rothschild an independent, reputable investment bank. The total value of the transaction 2 amounts to EUR 435.0 M (based on a on a one month average share price of Erste Group of EUR 25.69: EUR 519.7 M). The cash portion of the transaction will be financed from retained earnings. The share swap will be funded by issuing up to 16,102,267 new shares over the course of the transaction using existing authorised capital. The agreement further stipulates that the participating SIFs waive their rights to request the listing of BCR, as well as to special dividends. Through the privatisation contract, Erste Bank committed itself to listing BCR within three years from the completion of the October 2009 takeover, Mediafax reports.

Once the transaction is completed each participating SIF will hold an up to 1.0 per cent stake in Erste Group. The SIFs’ shareholdings in Erste Group are subject to the following lock-up provisions: each participating SIF can dispose of up to 25 per cent of its Erste Group shares immediately after the acquisition as well as after 6, 12 and 18 months from the date of acquisition.

SIFs could have obtained a better price

The Chairman of the Board and CEO of SIF Moldova, Costel Ciocea said that SIF companies could have obtained a better price in the negotiations with Erste for their BCR shares, if they acted of a coordinated way, mentioning that the shareholders of SIF Moldova will decide regarding the offer made by the Austrian group. “I am surprised by the position of the other SIFs which, although they summoned AGAs over the listing of BCR, upon request by shareholders, they continued negotiations. Eventually, it is shareholders that decide, and we, SIFs, have pretty much the same shareholders,” Ceocea said. This is also the opinion of investors and Stock Exchange analysts, which criticised the deal between four SIFs and Erste, saying that the price was much under expectations, Antena3.ro reports. A different opinion was voiced by Petre Pavel Szel, the chairman of Muntenia Invest – the company that administers the portfolio of SIF Muntenia, who believes that “this is the best that could be obtained at this moment.” He adds that he is not afraid of shareholders blocking the transactions, as “now we reached the situation mentioned by (SIF Banat-Crisana Chairman) Cuzman last month, about the completion of the transaction being 10 meters away.”

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