Council of State opinion upsets bidding process for privatizing Emporiki

Market doubts about Bank of Cyprus’s (BoC) commitment to its bid for Greece’s Emporiki Bank pushed BoC shares higher but caused the Greek government concern about the privatization. If BoC pulls out, France’s Credit Agricole will remain the only bidder in the race for Greece’s fourth-largest lender, the highlight of this year’s ambitious privatization plan. BoC said on Tuesday its legal advisers were examining a Council of State opinion that could affect Emporiki’s pension costs, a view the market saw as casting doubt on its bid. The share price ended yesterday up 8.84 percent at 7.14 euros, the most heavily traded issue by volume with 2.07 million shares changing hands, on what traders said was relief that the Cypriot bank may avoid the risky acquisition. «The market does not believe that it is a good deal for Bank of Cyprus. This is why the stock is rising. The Bank of Cyprus doesn’t have the critical mass to handle a merger with Emporiki,» an analyst at a leading Greek brokerage said. Eager to expand abroad, France’s biggest retail bank, which already controls 9 percent of Emporiki shares and 11 percent of voting rights, has offered 23.50 euros a share in cash, valuing Emporiki at 3.1 billion euros ($3.87 billion). The island’s biggest lender has offered 3.25 of its own shares plus 6 euros in cash for every Emporiki share, valuing the Greek bank at 3.83 billion euros. The Greek government, which controls 40 percent of Emporiki and has made clear it prefers a cash offer, was hoping that Credit Agricole would improve its offer and appeared concerned that BoC’s move may undermine this. «Such moves by the Bank of Cyprus cause problems for the privatization,» a Finance Ministry official said. BoC said in a statement it was examining the legal opinion «with a high sense of responsibility in terms of the interests of its shareholders, employees and customers.» Bank of Cyprus officials could not be reached for further comment yesterday but sources said that the bank submitted an application to the Capital Market Commission for a suspension of its bid. The Council of State view questions government plans to create a single, state-controlled pension fund for the banking sector, designed to relieve banks of unfunded pension liabilities. Emporiki Bank said yesterday that the opinion, whatever the final outcome, would not burden it financially since its pension issue has already been resolved. «There is no further impact on Emporiki,» it said in a statement. Emporiki is the main item on the conservative government’s 1.6-billion-euro privatization agenda for the year, aimed at paying down public debt, one of the highest in the eurozone. Bidders have until July 25 to submit counteroffers for Emporiki. (Reuters, Kathimerini)