Universal sale to drag into October
The decision by Laiki Bank (CPB) and Bank of Cyprus (BOC) to dispose of their stakes in Universal Life Insurance to the Dutch based multinational Eureko Group is expected to drag well into October, until a number of issues are sorted out and a due diligence of UL is completed.
Eureko is reported to have submitted a letter of intent to the two banks, but informed sources confirmed to the Financial Mirror that while the involved parties have reached a preliminary deal on the price, a number of issues still remain to be resolved.
In the meantime, Eureko is expected to commence a due diligence of the Universal Life accounts, a process that should be wrapped up by end September, beginning October, meaning a firm bid will only be possible sometime by the end of October.
According to Financial Mirror calculations, and backed by people close to the negotiations, the combined bid for the UL stake owned by the two major banks should reach CYP 22.5 mln.
Laiki Bank holds 35.01% of the capital of UL, while Bank of Cyprus holds 21.78%.
WIN-WIN
In the event that the deal goes through, this is seen as very beneficial to both Laiki and BOC since it will release desperately needed capital, which the two banks can then use to further expand their operations.
“Every million counts,” said an informed source, explaining that every CYP 1 mln capital released from the sale will allow the banks to loan out CYP 10 mln and generate a better return rather than see their investment stuck in UL, which in recent years has stopped paying a dividend.
More benefits for the two major banks will also arise from the release of their combined stakes in Hellenic Bank, since together with UL, the trio now control about 10% of the capital of HB, which ties up more capital.
The sale is also expected to generate good-sized profits for both Laiki and BOC, all of which will head straight into the P&L of the two banks, in the event that the deal is finalised, since previous revaluation losses have already been accounted for in previous years.
OLD FOX RETURNS?
Reports however that legendary Greek investor Demetris Kontominas is a partner with Eureko in the submission of bid interest for Universal Life has baffled analysts, who fail to see why the “old fox” — as some people refer to him in Cyprus — is eying a stake in UL, instead of pumping money into his other venture in Cyprus, Interlife.
“If Kontominas lifts the stake in UL to 80% as he buys other major shareholders, the whole process could cost him at least CYP 30 mln,” said an insider, who says the money could generate a better return in Interlife, which was set up after Kontominas sold Interamerican, first to Shacolas, which was subsequently merged with Paneuropean and Philiki and sold to the Laiki Group in 1999.
