Piraeus stake in BOC is key to takeover plans

Supreme Court ruling awaited on MPB

 

The 8.2% stake held by Piraeus Bank in the share capital of Bank of Cyprus was the subject of intense discussions Tuesday night between the two banks as it is obvious that this is the key to the various takeover scenarios involving the two banks and Marfin Popular Bank, and possibly even others.

Piraeus Chairman Michalis Salas was in Cyprus yesterday and met with financial and political leaders to smooth the way for his takeover bid for Marfin Popular Bank, which may yet face new complications if the Supreme Court decides today to overturn an earlier decision by the Cyprus SEC, according to which the takeover bid by Piraeus for MPB ranks first.

More importantly though was a high-level dinner hosted by the top management team of Bank of Cyprus in honour of Salas and his team late Tuesday at the bank’s headquarters in Nicosia.

Well-informed sources told the Financial Mirror that the “8.2% remains the key to how developments will unfold.”

Salas has stated that Piraeus wants to sell its stake and concentrate on its expansion drive into other countries after the BOCY management and board rejected its takeover offer.

The issue however is not that simple, since Piraeus may well decide to delay plans to sell the 8.2% stake until the takeover battle with Marfin Popular Bank becomes clearer.

Piraeus has until March 14 to convince MPB shareholders to accept its takeover offer, valuing MPB at half the price of its current going rate. The majority shareholder of MPB, the Dubai Investment Fund, has flatly rejected the offer and in most likelihood, other shareholders will also reject it.

This means that immediately after, or even before that if the Cyprus Supreme Court so decides, MPB will submit its takeover bid seeking control of both Bank of Cyprus and Piraeus.

“Whoever controls the 8.2% stake in BOCY will be the kingmaker, since it gives an edge to Piraeus that may decide at a later stage to submit a new and improved offer for BOCY in order to thwart MPB’s attempt to assume control, or use the proceeds of the sale of the shares worth EUR 541 mln to launch a better bid on Piraeus itself.”

A statement by Salas to Cypriot journalists that there is no ice between Piraeus and Bank of Cyprus is seen as an attempt to close old wounds and make a fresh start.

During his meeting with Central Bank Governor Christodoulos Christodoulou, the Chairman of Piraeus said, “we informed the Central Bank about our takeover bid for MPB and submitted our takeover document.”

Christodoulou on his part said that the Central Bank will carefully study the takeover document based on relevant legislation in force.

Referring to comments by the Archbishop according to which the Church wants to buy the MPB stake in Hellenic Bank and reach the 25% level of absolute control, Christodoulou made particular reference to Article 13 of the banking legislation according to which the intention to exceed the 10% stake level in a Cypriot bank needs the prior permission of the Central Bank.

Salas and his high level delegation also had meetings with the Minister of Finance Michalis Sarris andArchbishop Chrysostomos, while today he will meet with the Securities and Exchange Commission (SEC) chairman Giorgos Charalambous and Akis Kleanthous, chairman of the Cyprus stock exchange (CSE).
Meanwhile, Piraeus announced it would be asking its shareholders to approve an increase in the bank’s share capital with a view to buying Marfin. Piraeus’ offer involves offering one of its shares for 5.7 of Marfin’s shares, valuing Marfin at half its current market price, or 6.5 bln euros.
According to the Greek giant, the merger will create the second largest banking group in Greece with some 800 branches. Piraeus has called an extraordinary general meeting of its shareholders in Athens for February 12 to vote on the proposed merger.

 

Takeovers in Russia, Ukraine

Bank of Cyprus will pursue an independent course of action and possibly proceed with takeovers of its own in Russia and the Ukraine, according to an interview with BOCY CEO Andreas Eliades published in Philelfteros.

It appears, however, that there is no immediate announcement forthcoming and the statement made by Eliades referred to the organic growth of the bank and the long-held view that “if a good opportunity arises, it will be studied and action taken.”

Supreme Court decision

The timing of the takeover battle, but not the essence of the deals, may change if the Supreme Court in Nicosia grants a request by MPB to overturn a previous decision of the Cyprus SEC ranking Piraeus’ bid for MPB as first in line and ahead of MPB’s bid seeking control of Piraeus and Bank of Cyprus.

The ranking of a takeover attempt is important since the first in line gets to make its offer first, after which the other bank may follow with its own bid. Local legislation does not allow the two bids to be in progress at the same time.

The Supreme Court will today issue its final verdict. If it rules in favour of MPB, then the latter will be allowed to submit its takeover bids. Otherwise, if the court rules in favour of the SEC, then Piraeus will be allowed to carry on with its takeover bid seeking control of MPB.

Irrespective of which way the court rules, most analysts agree that the takeover offers are doomed to fail in view of the fact that they include share exchanges without the involvement of cash.

If and when a higher cash component is added to the share swap offers, then such a proposition might be accepted by the shareholders of the three warring banks.

 

Valuations in question

Meanwhile, the CSE has asked Piraeus to clarify the methodology behind its takeover bid for MPB, which as noted earlier is at 50% of the current value of the bank.

“We want full clarity in the way the valuation has been made,” a CSE official said.

Piraeus officials had previously noted during discussions with analysts that the valuation of MPB was made “after deducting the goodwill in the books.”

MPB has EUR 1.3 bln goodwill on its books after Laiki Bank acquired the operations of Marfin Financial Group, Egnatia Bank and the minority shares of Laiki Hellas that it did not own. But even if the EUR 1.3 bln is stripped from the current EUR 6.5 bln market cap of MPB, the valuation would not decline to the level of the share offer made by Piraeus for MPB, according to analysts.

Marfin strong-man Andreas Vgenopoulos had previously stated that if the Piraeus bid is found to have been deliberately made at such a low level, then it could be viewed as an attempt to manipulate the share price, and considered as a criminal offence.

 

Vgenopoulos contacts

Andreas Vgenopoulos, CEO of Marfin Popular Bank was also in Cyprus yesterday and held private meetings with the Central Bank Governor, the House President and AKEL leader Demetris Christofias and the leader of the main opposition DISY party, Nicos Anastassiades.

Following the meeting at the Central Bank, Christodoulou admitted that Vgenopoulos had first informed him of his intention to bid for Piraeus and Bank of Cyprus, and used the opportunity to call on investors to be careful and make their decisions after judging all the statements, offers and developments in progress.

Vgenopoulos received a timely boost last week after the Dubai Fund, the largest shareholder in MPB with a 16.9% stake, praised his handling of the developments and rejected outright the offer made by Piraeus.

 

Competition Commission
House President Demetris Christofias previously stated that any takeover attempt by Marfin Popular Bank for Bank of Cyprus will have to be approved by the Competition Commission.

He was speaking on Monday after a meeting with the Head of the Competition Commission, Giorgos Christofides. Christofias said that he had already stated his views on the matter and saw the situation with the banks ending up at the Competition Commission before any decision could be reached.
The AKEL leader stressed the importance of the Commission as an institution. “It is an independent body which we should respect. As President of the House of Representatives I would like to stress the fact that we are monitoring and will continue to monitor the work of the Commission as well as its role,” he said.