By Hamza Hendawi
AFTER WEEKS of secret negotiations, the Popular Bank announced yesterday that it had reached an agreement to acquire a controlling stake in Nicos Shacolas’ Paneuropean Insurance Group.
The deal, said to be worth about £40 million, sent Cyprus stock exchange share prices soaring by 3.7 per cent – its biggest one-day rise to date – and pushed the value of trade to an all-time high of £5.84 million.
“It was one of the few days when we felt that it was a real stock market,” said broker Harris Savvides of Laiki Investments, summing up yesterday’s sentiment on the floor of the fledgling market.
“I believe the market still has room to go higher tomorrow, but perhaps not by as much as today,” predicted Stavros Agrotis of CISCO, the Bank of Cyprus’ investment and brokerage arm.
“Prices are still within logical parameters,” he said.
The deal, news of which first broke over the weekend, came as nearly everyone thought that Shacolas, Paneuropean’s majority shareholder, had failed to sell his group’s insurance business at the price he demanded during lengthy negotiations with Greece’s Interamerican Group.
Sources close to the deal said serious negotiations got under way in late December in strict confidentiality. Apart from the executives directly involved, others were aware of the talks only on a need-to-know basis, they said.
“This must be the largest (commercial) deal ever in Cyprus,” Shacolas told a news conference jointly held yesterday with Popular’s Executive Chairman Kikis Lazarides.
“This is a balanced, fair and satisfactory deal,” declared Shacolas before he and Lazarides performed a symbolic handshake for the benefit of the cameras at Popular’s ultra-modern headquarters on the southern outskirts of Nicosia.
The deal with Popular Bank, the island’s second largest financial institution, gives Shacolas £1.55 for each Paneuropean share, or 35 per cent above Friday’s closing price. Interamerican Greece was said to have offered Shacolas £1.50. Yesterday, the share rose by 33 cents, or 28.6 per cent, to close at £1.48 apiece while the market’s entire insurance sector rose by 14.37 per cent with one stock, Universal Life Insurance, gaining as much as 46 cents.
Paneuropean daughter companies Interamerican and Philiki also registered steep rises in yesterday’s trade, moving up by 19 cents and 24 cents respectively. Both closed at £1.24 apiece.
Under the deal, Paneuropean warrants will change hands at 55 cents, while shares of both Interamerican (life) and Philiki (general) will be acquired for £1.30. Warrants of the two affiliated firms will be purchased by Popular at 30 cents each.
Lazarides told yesterday’s news conference the agreement was for the acquisition of a controlling 51 per cent stake. A public offer to other shareholders will be made in the next few days at the same prices offered to Shacolas, he added.
The acquisition, he said, makes the Popular Bank Group the leader in the local insurance sector. Combined with its strong share capital base, he added, the Group would now be able to sell insurance in Greece and other European Union member states.
Assuring Paneuropean’s 160,000 customers of a “phenomenally” better service and forecasting higher profits for the group, Lazarides said “clients and employees will have nothing to lose but a lot to gain” from the acquisition.
The Popular Bank Group already has two insurance arms, life insurer Cyprialife and general insurer Laiki Insurance.
“We expect that with this agreement to have a 32 per cent share of the insurance market,” Lazarides said. Securing a strong footing in the sector, he said, was part of the bank’s long-term strategies.
“Through this acquisition we are achieving our target, and through the synergies and cross selling that is put at our disposal now we are creating tremendous value added for the group as a whole,” he said.
“It tremendously strengthens the capital base of the insurance branch of the group. Together with the amassed experience of the executives of the new companies and the depth of management that exists it makes it far easier for us to achieve that part of our strategy.”
Benefiting from the positive sentiment prevailing in the market yesterday, Popular Bank’s shares rose by 13 cents to close at £4.03. The Bank of Cyprus, the island’s largest, gained eight cents to close at £4.01.
Shacolas, flatteringly nicknamed by local investors as the ‘father of mergers and acquisitions’, told the news conference that insurance was not among the “natural interests” of his group. Having offloaded the insurance business, he added, the group will now concentrate on its investment and real-estate activities.
Market traders say Shacolas will also use some of the cash from the sale of Paneuropean to bolster retail activities such as Woolworth and Cyprus Trading Corporation, whose shares rose yesterday by 8 cents and 8.5 cents respectively, at a time when they are facing tough competition.
