— Alpha rejects offer, not in shareholder interest —
National Bank of Greece kicked off a government-sponsored consolidation of the sector with an all-share bid for third-largest lender Alpha Bank, valuing it at around 3 bln euros.
But the move by Greece's biggest bank was quickly rejected by Alpha, which said the 8-for-11 share offer was not in its shareholders' interests, opening the way for a takeover battle.
NGB's move is seen as laying the ground for other banks to merge. If they do, this should give Greek lenders better access to wholesale funding markets which have been closed to them as a result of the country's severe debt crisis.
Greek Finance Minister George Papaconstantinou, whose government has been pushing the country's banks to merge, immediately welcomed NBG's bid.
"The government encourages such initiatives, which aim at strengthening the banking system and at a quicker exit from the crisis," Papaconstantinou said in a statement on Friday.
"The government has repeatedly said that the Greek banking system must restructure … The ongoing discussion between National Bank and Alpha Bank is in the right direction."
Both banks have extensive operations in Cyprus, where, too, a consolidation of the banking sector is anticipated.
NBG's offer gives the smaller bank's shareholders 29% of the combined group and the right to nominate the non-executive chairman. But it puts NBG firmly in control with the remaining 71% and the chief executive position.
It is the second time the two lenders have attempted to get together. In 2001, despite an agreement at board level, the deal fell through because of management disagreements.
Talks between NBG and Alpha had been going on for five weeks before NBG went public with its offer, a source close to the deal said, adding management issues were high on the agenda.
"I believe they (Alpha) want better terms and they are bargaining," said Alexander Moraitakis, head of Nuntius Securities in Athens.
Before Alpha's rejection on Friday, analysts had said the deal was more likely to go through this time round.
"The synergies that will come from the merger will boost earnings per share of both banks, while the move will possibly trigger more merger deals in Greece," said Kappa Securities analyst Nikos Galoussis.
BID SPARKS RALLY
NBG's 8-for-11 share offer sparked a rally in Greek bank shares with the benchmark index jumping 7.1%.
The country's number two and number four banks EFG Eurobank and Piraeus Bank surged 17 and 15%, respectively on market expectations they are next in line.
Piraeus made a bid for smaller, state controlled ATEbank and Hellenic Post Bank in July but withdrew the offer saying the government was taking too long to make up its mind.
The other bank likely to play a role in the wider reshaping of the sector is Marfin Popular which made its own move on Piraeus in 2007 but was rebuffed.
Marfin may reconsider a fresh bid for Piraeus or any other bank after its successful rights issue a week earlier that raised 488 mln euros.
CEO Efthymios Bouloutas told a news briefing on Thursday that the funds would be used for “organic expansion” in south east Europe, not excluding attractive offers that may arise.
NBG, which a source close to the deal said was being advised by Morgan Stanley and Merrill Lynch, said its offer represented a premium of 18.5% based on closing prices on February 17 and a 23.4% premium over Alpha's closing share price on January 17.
"The combined bank … would have a Core Tier 1 ratio of 10.7%, ranking among the best capitalised banks in Europe," NBG said in a statement.
It said the combined group would have a balance sheet of 200 bln euros and could generate annual synergies of 550-700 mln euros.
Shrinking deposits have added to the strains on Greek banks, making them reliant on European Central Bank funding for their liquidity needs as access to wholesale funding remains mostly shut because of wider Greek sovereign debt concerns.
By early afternoon, before the suspension, shares in Alpha Bank rose 6.32% to 4.88 euros, while National Bank gained 2.14% to 7.64 euros.
