Alpha wins Emporiki ‘bonanza’ [29/1/2013]
Credit Agricole literally donates its recapitalised Greek subsidiary with a dowry of 3bn euros to Alpha’s shareholders THE BIGGEST “jackpot” in the history of bank mergers - as some commentators called it - was won on October 1 by Alpha Bank after the French giant Credit Agricole chose Greece’s third largest lender as suitor for its Greek subsidiary Emporiki Bank. The takeover of Emporiki will not only make Alpha the country’s second biggest commercial bank - overtaking Eurobank among the local big four - but it will also dramatically improve its chances of remaining a private bank after the recapitalisation of the Greek banking system to be completed next year. Alpha’s deal with Credit Agricole will be finalised by December without the former’s shareholders having to pay more than the symbolic price of one euro. Moreover, the entire share capital of Emporiki will be transferred to Alpha fully recapitalised by its French owner, which will also inject an additional 0.5bn euros of capital to its subsidiary prior to its merger with Alpha. Another 150bn euros of an Alpha convertible bond will ensure that Credit Agricole, the third largest French bank, becomes a strong minority stakeholder in Alpha. The deal comes five weeks after Piraeus Bank took over the ‘financially sound’ part of state-owned ATEbank, while negotiations for the takeover of smaller Greek banks (Geniki, Post Bank, Millennium) by the four majors - National, Alpha, Eurobank, Piraeus - are in the pipeline, as the Greek banking system scrambles to meet EU criteria of capital adequacy through troika-supervised recapitalisation. Cost-free benefits “Upon completion of the transaction, Alpha Bank will purchase Emporiki Bank recapitalised by 2.85bn euros,” said the announcement of Alpha Bank. “Prior to completion, Credit Agricole SA will inject a further 0.5bn euros of capital in addition to the 2.3bn euro capital injection completed in July 2012,” Alpha added. “Credit Agricole SA will also subscribe into a 150m euro convertible bond to be issued by Alpha Bank, which, at the discretion of Credit Agricole SA, will convert into Alpha Bank common shares, subject to certain terms and conditions.” The transaction results in a net recapitalisation of the combined group of 3bn euros and “contributes towards Alpha Bank’s own recapitalisation plan”, the bank noted. Alpha has already received 2bn euros for its recapitalisation from the bank support fund, the Hellenic Financial Stability Fund (HFSF), which is financed by its eurozone counterpart, the EFSF. It is expected to receive another 2.4bn euros in the form of contingent convertible bonds (CoCos) from the HFSF instead of equity. CoCos are slightly different from regular convertible bonds in that conversion to equity is “contingent” on a specified event, such as the stock price of the company - in this case Alpha - exceeding a particular level for a certain period of time. The addition of Emporiki’s 3bn euros to Alpha’s capital base might even be enough for the new group to refrain from seeking additional HFSF funds in the form of common shares, almost guaranteeing that it will remain in private hands after the recapitalisation process. Why competition lost In view of the highly beneficial character of the deal to the interests of Alpha shareholders, especially the family of its chairman, Yannis Costopoulos, Credit Agricole alluded to the reasons for rejecting the offers of National Bank (NBG) and Eurobank in favour of Alpha. “Alpha Bank’s firm offer complies with the rules and regulations set by the relevant authorities,” said a Credit Agricole press release. “This transaction [will] contribute to the consolidation of the Greek banking sector as part of the restructuring and recovery of the country’s financial sector,” it added. These remarks were interpreted as suggesting that the disposal of Emporiki would enhance the tier 1 core equity of the French bank as well as that of the new Alpha-Emporiki group for 2013. According to banking sources, Alpha had smaller capital requirements than its competitors, following losses from the writedown on Greek bonds by 53.5 percent in March or the amounts of bad loans in their respective balance sheets. French relief Another reason for the transfer of Emporiki was the higher degree of NBG and Eurobank dependence on the ECB or the Bank of Greece for refinancing their liquidity needs due to the more precarious state of their assets. An important factor that swayed Credit Agricole was the participation of Qatar - whose international creditworthiness was indisputable - among Alpha’s major shareholders. Since the failed deal of a merger between Alpha and Eurobank last year, Qatar has pledged to support Alpha in an equity increase to cover its recapitalisation needs. Above all, the French group was pleased to relieve its consolidated balance sheet of a loss-making and risky asset like Emporiki, into which it has poured no less than 10bn euros since its purchase in 2006. Joint forces Founded in 1907, Emporiki’s heyday came in the 1960s and 70s as the second biggest Greek bank and financial flagship of Stratis Andreadis’ industrial, banking and shipping conglomerate, which was dismantled and nationalised in 1976. Credit Agricole entered state-owned Emporiki’s equity capital in 2000 with a minority stake of 6.7 percent, which was raised to 71.97 percent in 2006 and then to 100 percent in 2008. Jean Paul Chifflet, Agricole’s CEO, is expected to become a major shareholder in the merged Greek bank. Emporiki has a network of 300 branches nationwide and about 4,100 employees. They will be added to Alpha’s 408 branches and 8,000 employees. In terms of market share, Alpha holds 14.6 percent of loans and 12.5 percent of deposits, compared to Emporiki’s 8.5 percent of loans and 6.5 percent of deposits. Link:[http://www.athensnews.gr/issue/13514/58538]No data
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