THE Board of Directors of Bank of Cyprus (BoC) unanimously decided to submit an application to the Hellenic Capital Markets Commission for the revocation of its public tender offer for the shares of Emporiki Bank of Greece S.A.
The announcement was made in a statement released late last night.
The move was not unexpected. Earlier in the day doubts about Bank of Cyprus’ (BoC) commitment to its bid for Greece’s Emporiki bank pushed BoC shares higher and caused Greek government concern about the privatisation.
France’s Credit Agricole is now the sole bidder for Greece’s fourth-largest lender, the highlight of this year’s ambitious privatisation plan.
BoC said on Tuesday its legal advisers were examining a Supreme Court opinion that could affect Emporiki’s pension costs, a view the market saw as casting doubt on its bid.
At 1200 GMT, BOC shares were up 8.54 per cent at 7.12 euros on what traders said was relief that the Cypriot bank may avoid the risky acquisition.
“The market does not believe that it is a good deal for Bank of Cyprus. This is why the stock is rising. The Bank of Cyprus doesn’t have the critical mass to handle a merger with Emporiki,” an analyst at a leading Greek brokerage said before the decision was made public.
Eager to expand abroad, France’s biggest retail bank, which already controls nine per cent of Emporiki shares and 11 per cent of voting rights, has offered 23.5 euros a share in cash, valuing Emporiki at 3.1 billion euros.
The island’s biggest lender has offered 3.25 of its own shares plus six euros in cash for every Emporiki share, valuing the Greek bank at 3.83 billion euros.
The Greek government, which controls 40 per cent of Emporiki and has made clear it prefers a cash offer, was hoping that Credit Agricole would improve its offer and appeared concerned that BoC’s move may undermine this.
“Such moves by the Bank of Cyprus cause problems for the privatisation,” a finance ministry official said.
Earler yesterday, BoC said it was examining the legal opinion “with a high sense of responsibility in terms of the interests of its shareholders, employees and customers.”
Bank of Cyprus officials could not be reached for further comment yesterday.
The Supreme Court view questions government plans to create a single, state-controlled pension fund for the banking sector, designed to relieve banks of unfunded pension liabilities.
Emporiki bank said yesterday that the opinion – whatever the final outcome – would not burden it financially since its pension issue has already been resolved.
“There is no further impact on Emporiki,” it said in a statement.
Emporiki is the main item on the conservative government’s 1.6 billion euro privatisation agenda for the year, aimed at paying down public debt, one of the highest in the euro zone.
Bidders have until July 25 to submit counter-offers for Emporiki, in which the government holds about 40 per cent.
Emporiki shares were 3.3 per cent down at 25.10 euros. Its shares trade at 19.7 estimated 2006 earnings compared with a 13.9 European sector average multiple. Bank of Cyprus trades at 37.2 estimated 2006 earnings and Credit Agricole at 9.2, according to Reuters Estimates.
Bank of Cyprus shares ended 8.84 per cent up at 7.14 euros, the most heavily traded issue by volume with 2.065 million shares trading hands.
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