THE CENTRAL Bank yesterday threw the Bank of Cyprus (BoC) a lifeline when it rejected the latter’s tender offer to take over Greece’s Emporiki Bank.
It was the latest twist in an avalanche of events that has enveloped the banking industry in both Greece and Cyprus over the past week, after the BoC earlier this week abandoned its bid for
Emporiki, incurring the wrath of the Greek government.
Even though Greece’s securities watchdog rejected BoC’s request to withdraw its bid, leaving it technically in force, the finance ministry said it was no longer taking it seriously, tilting towards Credit Agricole’s all-cash offer.
“Greece will not seriously consider BoC’s offer,” Greek Finance Minister George Alogoskoufis told reporters. “The moves by BoC in the last days were not in line with the seriousness and responsibility required by the (privatisation) procedure.”
In a surprise move on Wednesday, BoC abandoned its bid for Emporiki, clearing the way for Credit Agricole to take over Greece’s fourth-largest lender by assets, the top item on the government’s 1.6 billion-euro privatisation agenda this year.
Alogoskoufis used harsh language at the time, barely stopping short of describing the reasons cited for the BoC’s pullout as bogus: “immaterial” was the term he employed.
Under Greek law, public tenders are binding, and for an organisation to withdraw its interest there must exist extraordinary reasons that render the bid burdensome for the suitor.
The BoC’s move came after a court in Greece questioned government plans to set up a single pension fund for the banking sector.
That meant that individual banks would have to take care of their own pension funds. Emporiki’s fund amounted to some £300 million – a tab that would have been picked up by the BoC, assuming it had merged with Emporiki.
Analysts speculated that this figure, on top of the offer of 3.78 billion euros (mostly in stock), made the venture prohibitive for the BoC.
Some went so far as to suggest that yesterday’s decision by the Cyprus Central Bank not to authorise the BoC’s bid was music to the ears of the top BoC execs.
A statement released by the BoC read:
“Today…BoC received a negative response from the Central Bank of Cyprus on its request to be granted permission to invest 40 to 100 percent in Emporiki Bank’s share capital.
“The Central Bank’s rejection effectively serves as a legitimate excuse for BoC to drop out of the procedure, leaving Credit Agricole as the sole contender.”
Central Bank governor Christodoulos Christodoulou yesterday explained the reasons for his action:
“Among these are the omission or lack of significant data [in the bid], as well as the fact the bank failed to elaborate on a number of issues of crucial importance that might have allowed us to study the matter and reach safe conclusions… It is also worth noting that the bank did not conduct the due diligence report, nor did it carry out the required legal or audit checks.”
Analysts said the withdrawal of BoC shatters Greek government hopes for an improved French bid. The regulator has set a July 25 deadline for any new counter-offers.
Local press reports yesterday said that the BoC had come under intense pressure from concerned shareholders to bail out. Commentators also drew attention to the fact that the BoC had lost a great deal of its credibility as a financial institution, and said the bank might now be even more vulnerable to a hostile takeover from Greece’s Piraeus.
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