Cyprus M&A deals hit EUR 2.5 bln in 2007 — Banks in the spotlight

Mergers and acquisitions involving Cypriot companies reached EUR 2.59 bln (CYP 1.52 bln) last year, falling short of the 2006 M&As by EUR 350 mln, but with the number of deals in 2007 doubling from the year earlier, with the emphasis once again on the banking sector.

A total of 92 deals were announced  in 2007 directly related to Cyprus or involving a Cypriot company, of which EUR 2.5 bln (CYP 1.47 bln) involved cash and EUR 73.4 mln (CYP 43 mln) was in equity swaps, according to the Financial Mirror Annual M&A Survey.

While the number of deals had nearly doubled compared to the 49 concluded in 2006, the total value was less than that of 2006 where a total of CYP 1.69 bln or EUR 2.94 bln were concluded.

The 15% decline is attributed to the mammoth deal of 2006 when the Marfin Popular Bank (formerly Laiki Bank) acquired majority stakes in Marfin Financial Group SA, Egnatia Bank SA and a minority stake in Laiki Hellas SA, which it did not own through a share issue valued at CYP 1.24 bln or EUR 2.14 bln.

 

Banks in spotlight

 

Bank of Cyprus was the most sought-after stock on the CSE, with Marfin Popular Bank initially taking an 8.2% stake in BOC at a cost of EUR 506 mln in the hope of securing management control, but which was rejected and hotly challenged by the board, management and shareholders of Bank of Cyprus, culminating in a 62% support vote for BOC management during an EGM.

MPB eventually backed off and sold its stake in the market to institutional investors. But it remained an active player in the M&A market during 2007, since it successfully sold its stake in Hellenic Bank to the Church of Cyprus for EUR 61.4 mln and acquired the Marine Transport Bank in the Ukraine for EUR 103 mln, the AS SBM Bank in Estonia for EUR 6.4 mln and a 43% stake in the Lombard Bank of Malta for EUR 48.3 mln.

In December, MPB purchased 50.04% of the Russian Rosprombank for EUR 83 mln while Bank of Cyprus took 95% of the AvotZAZBank in the Ukraine for EUR 52 mln soon after it officially commenced operations in Russia.

Universal Bank (USB) was also in the spotlight since it became the target of intense takeover activity, first by two shipping groups from Limassol, only to be sold back to the Aspis Group towards the end of the year.

The purchase by a group of Cypriot investors of the government’s 88.01% stake and the 11.99% stake of the European Investment Bank held in the Cyprus Development Bank for EUR 75 mln heralded the government’s sole privatisation of a state-owned institution in 2007 and the year’s fourth largest deal.

Piraeus Bank was also active in the M&A market, taking over the four branches and the HQ building in central Nicosia of the Arab Bank for EUR 15 mln, while Emporiki Bank SA upped its stake in Emporiki Bank of Cyprus by acquiring a significant stake from Quantum Corp.

 

Property

 

In 2007, Cyprus’ two largest property development and management companies were successfully acquired by foreign groups. Dolphin Capital acquired Aristo Developers Group for EUR 227.5 mln, while Thalassa Holdings/REEF acquired Lanitis Development for EUR 125 mln.

The excellent location of the Nicosia Hilton was probably a major factor leading MIG Leisure, a subsidiary of Marfin Group to buy a controlling stake in Cyprus Tourism Development Co from the Louis Group for EUR 58 mln.

 

Investments

 

Investment companies were also the subject of intense takeover activity in 2007, with more expected this year as the consolidation in the sector continues.

Bank of Cyprus acquired majority control of Cytrustees Inv for EUR 29.5 mln, Aspis Holdings snapped up Laser and Leda Investments while Hellenic Bank wrested majority control of Athena Cyprus Investments.

Bank of Cyprus also acquired a significant stake in Interfund, giving it effective control, while SFS Group successfully acquired majority control of Triena Investments through a share swap.

 

Shipping

 

The shipping sector was particularly active during the year. The first major deal was in April when Amalia Vardinoyanni snapped up a 15% stake in Megabet, which was subsequently converted to Sea Star Capital and following a massive capital increase proceeded to acquire significant stakes in Anek Shipping (also from Vardinoyiannis) and in December, controlling stakes in Minoan Lines and Hellenic Seaways, turning the CSE-listed Sea Star into one of the largest shipping companies in the eastern Mediterranean.

 

Cash is king

 

The main characteristic of 2007 is that of the 92 deals, only 7 involved an equity swap while the rest were fully funded in cash.

Greek suitors were once again the dominant players in the Cyprus M&A sector, snapping up companies in their bid to accelerate their presence in the Cyprus market. There were many Greek company registrations in Cyprus as more and more Greek companies decided to take advantage of Cyprus’ competitive tax regime and its double taxation avoidance treaties with many countries.

The proposed merger between Vassiliko Cement Works and Cyprus Cement, which involves an equity swap has not been taken into consideration in the Financial Mirror M&A Survey pending the actual share exchange, which is likely to be concluded in 2008.