Shareholders support Vgenopoulos
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A new era begins today for Laiki Bank following the overwhelming and unanimous vote of approval by shareholders on Tuesday that paved the way for the island’s largest takeover bid to combine the activities of Laiki with
The approval comes a day after the Greek Capital Markets Commission gave its blessing to the deal and approved the public offer document while earlier, the board of the Athens Stock Exchange (ATHEX) announced that it has accepted the application made by Laiki Bank to list its 357.464.742 existing shares in
Trading on the shares will start as soon as the public offers for the acquisition of Marfin and Egnatia are completed, the Athens Stock Exchange Board said, paving the way for the island’s second dual listing on the ATHEX.
Laiki shareholders approved the proposal to issue a total of 465.4 mln shares at a value of CYP 3.00 per share (EUR 5.14), or a total deal value of CYP 1.4 bln (EUR 2.4 bln) to finance the share swap of 5.757 for every Marfin Financial Group share (value EUR 30 per share), 1.2090 per Egnatia shares (EUR 6.30 per share) and 14.9962 per Laiki Hellas shares that it does not own (value EUR 78.15 per share).
Assuming a 100% acceptance level, the total market cap of the new Marfin Popular Bank will reach EUR 4.28 bln based on its 822.9 mln shares in circulation.
Laiki shareholders also approved the name change to Marfin Popular Bank.
A total of 394 shareholders were present at the EGM with proxies for 839 private and legal shareholders for a total of 1233 representing 52.93% of the bank’s capital.
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Vote for management
The strong turnout and the large margin with which Laiki shareholders approved the merger is seen as a major vote of confidence in the management of the new group, headed by Marfin Vice Chairman Andreas Vgenopoulos and assisted by Laiki CEO Christos Stylianides.
In the short period of six months since he first stepped in by taking over the controlling stake HSBC held in Laiki Bank, Vgenopoulos has transformed the way management performs in
Gone are the days when the management would pursue policies to serve its own interests. The key ingredient under Vgenopoulos is to bolster shareholder value, improve staff morale through reward according to performance coupled with heavy emphasis on accountability, transparency and performance.
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Powerful bank in the making
Marfin Popular Bank will be based in
The post-merger indicative ownership structure will be Dubai Investment Fund (14.5%); Lanitis family, Theocharakis, Vgenopoulos (3% – 5% each); Tosca Fund (7%); institutional investors (35%), while the rest will be free float.
Marfin Popular Bank is forecasting net profits of EUR 249 mln for 2006, the financial year which will see the merger completed, but thereafter, the profit targets are very conservative. Net profit is seen climbing to EUR 370 mln in 2007, EUR 440 mln in 2008 and EUR 510 in 2009 with the respective P/B multiples (assuming CPB price of CYP 3.00 and 100% acceptance of the public offers): 1.29x/1.23x/1.15x/1.08x including goodwill.
The immediate benefit from the three-way merger is the cost saving of EUR 80 mln in 2007 and EUR 120 mln in 2008. Profitability figures incorporate tax savings of EUR 5-6 mln due to the fact that the group is based in
The group will aim to distribute 50% of its profit in the form of a dividend.
Marfin Popular Bank plans to expand organically in
The return-on-equity (ROE) of the Marfin Popular Bank based on the profit assumptions gives an ROE of 10.7% for 2007, 12% for 2008 and 12.9% for 2009.
Such low ROE rates are not what Marfin, Egnatia and Laiki are known for, which is why there is no doubt that when Vgenopoulos says that he and his management team will make every effort to beat such a low ROE target, they are most likely to succeed.
Assuming that Marfin Popular Bank lifts its loan portfolio by EUR 30 bln and it follows its intended 50% payout dividend policy, then by 2009, the Group will see its capital adequacy ratio declining to 11% from the current 17.8% rate (less goodwill), which may then raise the issue of tapping the market for capital.
Total customer deposits are seen at EUR 15.8 bln, while total advances will reach EUR 11.7 bln.
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Private placement
The next major item on the Marfin Popular Bank agenda besides completing the regulatory aspects of the merger is the private placement of shares that Marfin will need to do in order to dispose of its shares that it will receive because of its holdings in Laiki Bank and Egnatia.
Marfin currently holds close to 14% of the share capital of Laiki and 43% of Egnatia. When Laiki offers the share swaps to acquire up to 100% of Marfin and Egnatia, there is a good possibility that Marfin will receive 100 mln shares of MPB, which it will need to dispose to other shareholders or cancel since by Cyprus law, such shares are considered as own shares and not to be allowed to be held by related parties.
In response to a question by the Financial Mirror regarding the timing of the placement and whether or not a road-show has been planned, Vgenopoulos had previously said no exact dates were fixed, but said that such a placement may occur towards the end of November, depending on the timing of the regulatory approvals.
The timing of the issue and the prevailing price of the Laiki shares on the CSE is important to note, since if the shares will be disposed at, say, a 20-25% discount compared to the then prevailing price, but nevertheless, above the CYP 3.00 swap price, then the price may need to hover in the range of CYP 3.80-4.00.
The 20-25% discount component is theoretical and has been derived from the fact that when HSBC dumped its stake in CPB to Marfin, it did so at CYP 1.70 when the CSE price of the CPB shares were CYP 2.20 for a 25% discount, which may well be repeated.
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