National Bank (NBG), the country?s largest lender, has proposed merging with smaller rival Alpha in a bid to create a larger and stronger bank positioned to withstand worsening economic conditions, but the offer was rejected.
Alpha Bank, Greece?s third largest lender, turned down the offer, citing prevailing economic uncertainties and terms which are not beneficial to its shareholders.
After months of speculation over a bank deal brewing, NBG announced on Friday that it has proposed to Alpha an all-share merger, offering eight new NBG shares for every 11 Alpha shares held.
The proposal priced Alpha shares at a 23.4 percent premiun to Thursday?s closing price.
?The proposed merger will create the biggest bank in Greece with the strongest capital base and a lender with a leading position in southeastern Europe that will also have international recognition,? NBG said in a statement.
With assets of almost 200 billion euros, the new bank would create annual synergies of 550 to 770 million euros due to economies of scale, improved international operations and reduced administrative spending at home and abroad, NBG added.
News of the offer sent bank shares on the Athens bourse on Friday almost 7 percent higher on expectations that a new wave of consolidation activity will take place in the sector. NBG shares rose 1.20 percent to 7.57 euros and Alpha Bank shares advanced 4.36 percent to 4.79 euros, before trading in both stocks was suspended.
Greek banking regulatory authorities and government officials have been encouraging local lenders to hook up in order to help them withstand rising bad loans and difficult liquidity conditions as Greece?s deepening recession enters its third year. Finance Minister Giorgos Papacontstantinou described on Friday talks between the two sides as being in the right direction, ?confirming that banks cannot be indifferent (to conditions) and not participate in the challenges they faced.?
About a decade ago the same two banks tried to merge but the plan fell apart after disputes arose over management roles between the two senior executive teams.
Brokers said that they expect NBG to come back with a counter offer, possibly over the weekend, interpreting Alpha?s rejection as a way of getting a better price on the deal.
?Alpha Bank is in a good position due to its relatively low exposure to Greek government bonds. I see it as more likely that the deal will ultimately go ahead,? said a broker from a leading Athens brokerage.