Bank of Cyprus makes cash and stock offer for Emporiki

The Bank of Cyprus (BoC) launched a cash and stock offer yesterday for Emporiki Bank, valuing the Greek lender at 3.78 billion euros ($4.77 billion) and outbidding rival suitor Credit Agricole. BoC offered 3.25 of its shares, plus 6 euros in cash, for each share of Emporiki. French bank Credit Agricole had offered 3.1 billion euros in cash for Greece’s fourth-largest bank. «We feel this is a very good offer and we are confident that it is a deal that can go through,» BoC group chief general manager Yiannis Kypri told Reuters. He said the Cypriot bank would not need to raise additional capital to fund the acquisition. «We will not need to raise additional capital. Obviously we would have to issue new shares, but for the cash requirement of 6 euros, we would not require financing for it,» Kypri said. Analysts said the cash and stock offer pales beside the French bank’s all-cash bid. «The offer is basically in shares and not in hard cash, so outright it is not so attractive,» said an analyst who declined to be named. Other analysts said the rival bid might not force Credit Agricole to raise its offer in the near term, as its bid had the advantage of being in cash, whereas BoC’s offer is partly made up of shares. «It would not be necessary for Credit Agricole to raise its offer straight away,» said Kepler Equities analyst Pierre Flabbee. «I think (Greece) would like a cash offer.» Credit Agricole, which already holds a 9 percent stake in Emporiki, earlier this month offered 23.50 euros for each Emporiki share. Emporiki trades at 20.9 times 2006 estimated earnings, at a premium to the Greek banking sector’s multiple of 14.8, according to Reuters Estimates. Bank of Cyprus has a market value of $5.05 billion, barely more than Emporiki, capitalized at $4.55 billion, according to Reuters data. On Wednesday, Finance Ministry officials said in response to rumors of a possible cash-and-stock bid that the government would evaluate the share part in BoC’s offer as a cash equivalent through a simulated private placement, to render it comparable. «The total bid is 28.55 euros per share, which is a 5 percent premium to Emporiki’s closing price on Wednesday. This represents 3.5 times book value versus 2.9 times Credit Agricole’s offer,» one analyst said. BoC said its offer for Emporiki was conditional on at least 40 percent acceptance. New shares would be issued with BoC shareholders waiving their rights. The deal, if successful, would boost earnings per share by the second year. «Greece is the main focus of our strategy for growth, Emporiki’s brand name will be kept,» Kypri told analysts during a teleconference. He said the group expected much lower loan-loss provisions at Emporiki than rival suitor Credit Agricole’s 300-million-euro estimate. (Reuters)

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