Bank of Cyprus hits back at Marfin merger talk

Bank of Cyprus CEO Andreas Eliades dismissed the friendly gestures from the CEO of Marfin Popular Bank Andreas Vgenopoulos asking for a meeting to discuss the proposed bid that Marfin wants to make seeking control of Bank of Cyprus.

“The market today (Monday) has given the appropriate response,” said Eliades, referring to the steep decline in the share price of Marfin and the satisfactory increase in the share price of Bank of Cyprus as the best answer to the merger talk made by Vgenopoulos.

“Vgenopoulos did not present a detailed business plan to support his case,” said Eliades, the most powerful business person of Cyprus who during the last two years has boosted the profits of BOCY and the share price higher, implying that he considers the Marfin bid as “hostile”.

The same tone was echoed by BOCY’s Deputy Group CEO and Cyprus operations CEO, Chariloas Stavrakis, the architect of the massive profitability increase in Cyprus, who said the Marfin proposed bid has many shortfalls.

Stavrakis told the Financial Mirror that the 20% savings promised by Vgenopoulos would have to come through massive layoffs, describing the staff redeployment promise as unsatisfactory for BOC employees.

“Since the board of Bank of Cyprus has already rejected the proposed bid, any approach to our shareholders will be considered as hostile,” said Stavrakis, adding that if the merger is allowed to proceed, then it would see control of Cyprus’ premier financial institution passing into foreign hands.
He also referred to the new proposed entity breaking competition rules and having a dominant position in the market, issues that would need to be taken up by the Protection of Competition Commission.

 

Merger is difficult

There is very limited information as to Marfin’s plan and motivation for the two unsolicited offers it submitted for BOC and Piraeus. This would create essentially a monopoly in the Cypriot banking sector, while it will more than triple the integration work needed in Marfin Popular itself that has just been created through the combination of three organisations in Cyprus and Greece. 

Bank of Cyprus officials insist that hostile approaches in banking are very rare for the very reason of the importance of the human factor in the integration effort required, and the effort required in this case is unprecedented by any standard. 

Bank of Cyprus officials also say that Marfin has very limited track-record consisting of three Greek networks with small standalone operations and ex-Popular Bank’s operation in Cyprus, while it still has to publish audited financial statements.

There is also the issue of no premium for Bank of Cyprus shareholders to consider and no cash component in the deal, which is worse than the Piraeus bid, which at least had two euros per share cash component.

Bank of Cyprus has not solicited the approaches it has received and it does not consider that it requires such combinations to deliver value for its shareholders.

Managements of other banks appear to consider that this could be good for their shareholders, however, Bank of Cyprus management says its current course of expansion in Greece, to be followed soon in Romania and Russia as well as improved operations in Cyprus offer a better and safer future for the benefit of its own shareholders.