Eurobank new shareholder structure facilitates a potential merger

Eurobank announced that EFG Group, currently holding 44.7% of Eurobank shares, in order to satisfy regulatory authorities intends to transfer 43.55% to nine younger members of the Latsis Family and to the John S. Latsis Public Benefit Foundation, each of whom will hold approximately 4.4% of Eurobank shares, while EFG Group will retain 1.15%.

According to the bank’s announcement, European regulatory authorities deemed necessary, in addition to the distinction of the two groups in terms of branding (Eurobank Group – EFG Group), to also obtain a clear distinction in terms of board composition and accounting treatment, which consequently will lead to a distinction in ownership. Furthermore, Eurobank will no longer be consolidated in EFG Group financial statements, while Eurobank BoD members nominated by EFG Group will resign and vice versa.

In a separate press release issued by EFG Group it is noted that “the recapitalisation of the Greek banking system, by the HFSF is underway, but, at this stage, its modalities, including the terms for the participation of existing or new private shareholders, are not known” adding that “each new shareholder (following the transaction) will decide individually what position to take on their participation in the forthcoming recapitalisation, once the terms have been finalised by the Hellenic Republic”.

Following the aforementioned transaction, no single shareholder will hold >5% of Eurobank shares, although Latsis family will retain its control on the 44.7% of Eurobank share capital. Apart from the regulatory requirements regarding the major shareholder, I think that the new shareholder structure also facilitates a potential merger of Eurobank with another bank and the participation of the former major shareholder in the structure of the new entity. Note also that Eurobank ownership is now fragmented easing the disposal of small stakes, i.e. below the 5% threshold without requiring any official announcement. From a regulatory perspective, Eurobank will be regulated only by BoG, while previously it was also regulated by SNB, due to its consolidation in the financial statements of the parent company based in Switzerland.

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