THE Laiki Group yesterday launched a bid for Greece’s Marfin Financial Services and Egnatia Bank in a move designed to create a financial heavyweight focused on fast-growing Balkan and Middle Eastern markets.
Laiki said it would offer a total of 465.4 million new shares, valued at three pounds each, to shareholders of the other two banks in a bid with a total value of £1.39 billion.
The capital issue would include a private bid to acquire all shares in Laiki Bank (Hellas), a subsidiary in Greece.
If the bid is successful, Laiki said it would apply for a listing of its shares on the Athens and Dubai stock exchanges.
Marfin Financial Services is now 31.5 per cent owned by Dubai Financial, an investment fund.
The new venture would be headquartered in Nicosia. “This is fully in line with our strategy for expansion in south-east Europe, the Mediterranean and the Arab world,” said Andreas Vgenopoulos, Marfin’s CEO and vice chairman.
Dubai Financial, a subsidiary of Dubai Investment Group, was expected to retain at least a 14 to 15 per cent holding in the new venture, with another estimated 40 per cent allocated to institutional investors, Vgenopoulos said.
The move follows months of merger talks between the three, which now have overlapping stakes in each other.
Brokers said it was also a turning point for an almost inevitable consolidation of the Cypriot banking market now dominated by small to medium sized players.
“It is a harbinger for things to come,” said broker Calliope Toumpouris at CLR Securities and Financial Services.
The Cypriot bank said it was offering 5.7570 shares for each Marfin share and 1.2090 for each Egnatia share.
It said it valued Marfin at 30 euros per share, Egnatia at 6.30 euros per share and Laiki Hellas at 78.15 euros per share. The enlarged group would have an estimated market capitalization of 4.28 billion euros.
Laiki said the new combined group would have, by the end of 2006, 22.3 billion euros in assets, 300 branches and a presence in 13 countries.
“It is estimated that the new group profitability capacity is for net profit after tax of 370 million euros in 2007, 440 million euros in 2008 and 510 million euros in 2009,” Laiki said.
Analysts said the task of merging three banks would be challenging. “If it works it will mean more competition, but as it is quite challenging there are execution risks,” said analyst Joanna Telioudi, head of research at HSBC Pantelakis Securities in Athens.
“Obviously the three want to be key consolidators in the small-to-mid-sized banks league. The merger is more interesting from a mid-to-longer term perspective.”
The net equity of the new group would amount to 3.3 billion euros with a capital adequacy ratio of 17.7 percent. That, Laiki said, would allow the group to support growth with potential of generating additional assets of up to 30 billion euros.
“The combined entity will be big enough in terms of equity capital not to be ignored,” said Vassilis Theodorou, head of research at P&K Securities in Athens.
“It will be interesting to see what growth strategy will be rolled out. Fast growth requires systems and people. The merged group will have the funds to support this.”
Laiki shares closed 2.9 per cent higher at £2.85 in heavy trading on the Nicosia bourse. Brokers said there had been some early selling pressure from retail investors unclear about the implications of the deal, but which later eased.
The acceptance threshold for the offer to be valid was 40 per cent of shares in issue of each concern and completion of the merger was subject to regulatory approval as well as approval of shareholders.
Marfin holds just over 10 per cent in Laiki and more than 36 per cent in Egnatia.
