The Board of Directors of Emporiki Bank made a mild tilt towards the public tender offer made by Bank of Cyprus Pcl seeking control of the Bank, while they also found positive aspects in the offer made by Credit Agricole for the acquisition of a minimum 40% and a maximum of 100% of the bank’s capital.
According to the EMP Board, the BOC bid is better for shareholders since it has a higher valuation, but not guaranteed, since it depends on the price fluctuations of BOC shares as the offer is 6 euros in cash and 3.25 shares of BOC for every 1 EMP share, but its strategic goals are not clear since the objectives are vaguely stated. The business plan of BOC does not seem to have any negative impact on the employment within the Group of Emporiki Bank, the Board added.
The Credit Agricole bid on the other hand offers better long term benefits for the EMP group, since the French group promises higher growth in the future, but the offered price of 23.5 euros in cash stands marginally higher than the lower end of Emporiki’s fair value and does not include any premium.
The Greek press described the Board recommendations as balanced, since it mentioned the pros and cons of each bid without taking an actual position.
No premium
Based on a valuation report prepared by JP Morgan, the acceptable price range for control of EMP was placed at between 23 euros to 27 euro per share. According to JP Morgan, in similar deals abroad, the bidder usually needs to place a premium of 16% to 29% to take full control of a bank, called control premium.
Based on the average price of EMP before the bid was submitted, the price was 24.45 euros per share, which is why the Board of EMP believes that the fair value of a potential bid should be between 26.91 euros to 34.09 euros per share.
The Board of EMP also made particular mention of the intention of CA to apportion a further EUR 300 mln against non-performing loans of EMP and EUR 100 mln against the book value of some of the subsidiaries to harmonise the Greek bank’s credit and management risks with those of its own in place in France.
CA has also stated that it will not lay off staff, but prefers the voluntary redundancy of up to 500 staff and the commitment to hire one new employee for every two made redundant.
