THE DECISION to move Marfin Popular Bank (MPB) out of Cyprus had been in the pipeline for over a year and “didn’t just come out of the blue”, a well-informed source told the Cyprus Mail yesterday.
The various scenarios around Friday’s announcement that MPB will be merged into Marfin Egnatia Bank (MEB) had “been studied for over a year”, and might ultimately lead to the restructured group’s Cyprus operations being sold to another bank.
The same source said that Marfin Investment Group (MIG) Executive Vice-Chairman Andreas Vgenopoulos had retained consultants over a year ago to study the possible repercussions of the options being considered.
The announcement specified that the move would allow the banking group to “improve the Group’s strategic flexibility in terms of potential expansion in the Greek market and south-east Europe, strengthen the Group’s capital base by 10 per cent and benefit from the provision of Greek law to execute share buyback programmes with a view to facilitate the Group’s strategic expansion”.
The source said that it is very likely that by the end of the year, a restructured Marfin Egnatia Bank, with MPB as its subsidiary, would either proceed to merge with another bank, or simply buy another Greek bank.
A series of buybacks, “which would be very difficult in Cyprus” under current banking regulations, would see an Athens-based MEB use its cash reserves to repurchase outstanding shares in order to reduce the number of shares on the market.
The immediate result would be to increase the value of shares still available – by reducing supply – and eliminate any threats by shareholders who may be looking for a controlling stake. This would strengthen MEB’s position in any future merger or takeover bid.
With a big deal in the pipeline, MEB would have the option of selling off a still-profitable MPB in order to beef up its war-chest.
“It is only a matter of time before MEB’s Cyprus operation is sold off”, the source said.
Given the relative size of banks operating in Cyprus, Bank of Cyprus would most likely be refused permission by the Central Bank to buy MPB. The source said that “there have already been whispers that Alpha Bank would put in an offer.”
A clear explanation to MPB shareholders of the proposed merger of MPB into MEB is expected to be given at its Annual General Meeting at the Nicosia Hilton today, starting at 6pm. The merger is subject to approval by both banks’ shareholders – as well as the relevant supervisory bodies – so an Extraordinary General Meeting will have to be organised for this purpose.
Friday’s announcement specified June 30 as the “restructuring date”. It is highly unlikely that Vgenopoulos would have made the announcement without lining up support from MPB’s major shareholders, who include Dubai Financial and MIG.
The new revelation about Vgenopoulos’ long-term planning sheds new light on past events. It appears that when MIG made its request to the Cyprus Central Bank (CB) in November 2008 to be allowed to raise its shareholding in MPB to 30 per cent, an alternative scenario was already in place in case the request was not met.
When MIG withdrew its request in February 2009, CB Governor Athanasios Orphanides came under fire for not discussing the matter with Central Bank Board members who had been appointed by the government.
Vgenopoulos is known to have met President Demetris Christofias in recent months.
“Vgenopoulos is a deal-maker, so it is inconceivable he would not have made his position clear to the President in terms of what he wanted, in order to stop Marfin from moving to Greece.”
But even if this were the case, President Christofias would not have been able politically or legally to challenge the independence of the Central Bank in order to accommodate a request for exceptional treatment.
