ECONOMY

Goliath seen a better suitor than David for Emporiki

The government would like French Credit Agricole to raise its offer for Emporiki bank and trump Bank of Cyprus’s rival bid, a senior Finance Ministry official said yesterday. Greece is keen to privatize its fourth-largest bank, where it controls 40 percent, as part of its ambitious privatization plan to raise cash and pay down public debt. Major banking group Credit Agricole, which already owns 9 percent of Emporiki, has made a 3.1-billion-euro cash offer and smaller Bank of Cyprus (BoC) an offer of 3.78 billion euros ($4.8 billion) mostly in stock. «Clearly, we would like Credit Agricole to make an improved offer because our final decision will be based on the highest offer,» the official, who requested anonymity, told Reuters. He said the government prefers cash and wants a major foreign player to come in and increase competition in the Greek banking market, which has been riding a wave of strong consumer borrowing. BoC is offering 29.3 euros per Emporiki share, a 25 percent premium over Credit Agricole’s bid. Emporiki trades at 21.3 times 2006 estimated earnings, a premium to the European banking sector’s multiple of 15, according to Reuters Estimates. Facing increasing competition at home, the French bank sees Emporiki as part of its strategy of overseas acquisitions to spur growth. Greek banks are seen as good vehicles for expanding in Eastern Europe, where they secured an early footing. French favored Analysts said the government favored Credit Agricole, not least because it was unclear whether the smaller Cypriot bank could handle the acquisition. «There are good signs because they had a successful restructuring themselves, but they have no track record in acquisitions. They have not done it before,» said banking analyst Alexandros Boulougouris at P&K Securities. Credit Agricole has a market capitalization of 42.6 billion euros, while BoC about a 10th of that, 3.9 billion euros, only slightly more than Emporiki’s 3.6 billion euros. Analysts said BoC would have trouble running a bank that has been under a tight state grip and with powerful unions opposing its privatization. «I don’t think they have the know-how to handle Emporiki. They are too small,» another banking analyst said. A financial source close to the Greek government said it was also concerned that selling to a domestic player might lead to unpopular redundancies and that a foreign entry would be a vote of confidence for the Greek economy. «If one of the medium-sized (Greek) banks starts buying Emporiki they will close branches,» said the source, who asked not to be identified. Credit Agricole was not expected to improve its bid in the immediate future. «It’s never a good thing to act in a precipitate way in a takeover. They (Credit Agricole) are not going to come back tomorrow,» the source said. «The prospectus has not been issued (by Credit Agricole) and we don’t expect it on the table before July 15.» The source said the government still hoped for more cash offers from abroad. Athenian banking sources said many players were deterred by the government’s obvious preference for Credit Agricole and what they said were unclear privatization rules. «They made clear from the start they wanted Credit Agricole and did not spell out the rules of the sale. This turned away some potential buyers,» a banking source said. BoC officials appeared confident their bid would receive due consideration and government officials confirmed the Cypriot offer would be examined seriously. «We might prefer a cash offer but we do not reject the BoC’s cash and shares offer, we are examining it as well,» the ministry official said. (Reuters) BoC says not interested in partnership with Piraeus The Bank of Cyprus (BoC) is not interested in any form of partnership with Piraeus Bank with regard to acquiring control of Emporiki Bank, Andreas Iliadis, BoC’s executive director, said during a presentation to stockbrokers yesterday. «Yes, we received a proposal for a partnership in management, but for us the issue is closed,» he said. Iliadis said Piraeus Bank, which announced this week that it controls 6 percent of the shares of the Bank of Cyprus, «cannot block a share capital increase for the acquisition of Emporiki, as we in Cyprus can command more than 25 percent of the bank’s votes belonging to the social insurance funds.» He said institutional investors control 37 percent of the Bank of Cyprus, while the broad dispersion of shares accounts for 36 percent of the total. «If we are successful in our bid for Emporiki, we possess both the know-how and the will to reorganize a bank with a dose of state-sector mentality in a year-and-a-half, without dismissing any of its staff,» Iliadis added.